India’s automobile industry is set to make a strong debut into 2026, after a record year, with industry volumes expected to rise by around 6–8%. This growth is attributed to policy support such as GST rationalisation, easier monetary conditions and income tax relief, which are expected to improve affordability and keep consumption resilient across vehicle categories. The recovery seen this year went beyond a simple post-slowdown bounce. Passenger vehicle sales gathered pace after a weak start to the year, supported by steady rural incomes, firmer urban demand and better access to financing, PTI reported. SUVs remained the clear favourite among buyers, while CNG and electric vehicles continued to gain acceptance, signalling a gradual shift in powertrain preferences rather than a sudden transformation.Outlook for 2026While demand indicators remain encouraging, 2026 is increasingly being viewed as a year of preparation before tougher regulations come into force. Automakers are gearing up for higher compliance costs ahead of CAFE norms from 2027 and future emission standards, developments that could weigh on margins and influence pricing decisions. Safety regulations, including the mandatory adoption of ABS and CBS for two-wheelers, are already pushing up entry-level prices, raising concerns about demand elasticity in price-sensitive segments.Challenges on the supply side also persist. Despite higher localisation, global uncertainties, tariff risks and currency depreciation continue to affect costs, especially for premium models and vehicles with high component intensity. Industry watchers say supply chain stability and pricing discipline by OEMs will be key to sustaining dealer confidence through the first half of 2026.At the same time, investment strategies across the sector are evolving. Carmakers are increasingly channelling capital into electrification, charging infrastructure and platform upgrades, while continuing to scale up conventional powertrains to meet immediate market demand. This parallel approach reflects a market that is transitioning steadily rather than pivoting sharply. Citing the latest Dealer Satisfaction Index for December 2025, Federation of Automobile Dealers Associations (FADA) president CS Vigneshwar said that 74 per cent of dealers expect good to very good growth in the December–February period. He added that momentum could extend into the first half of 2026 if OEMs manage inventory efficiently and avoid sudden price hikes. However, he cautioned that price increases from January and the mandatory rollout of CBS and ABS across two-wheelers could dampen near-term demand, as entry-level prices may rise by at least Rs 5,000. Industry body SIAM also expects the year to close on a positive note. SIAM President Shailesh Chandra said all segments are likely to post growth over the previous calendar year, with exports showing strong double-digit expansion. “In addition, we expect strong double-digit growth in the export volumes across all segments, indicating growing brand acceptance of vehicles made in India,” he said, adding that the outlook for 2026 remains aligned with India’s vision of a Viksit Bharat. The component industry shared a similar view. ACMA Director General Vinnie Mehta said, “The Indian auto component industry is expected to continue to grow steadily next year, with domestic demand and localisation providing support, even though global uncertainties and supply-chain risks persist.”What are companies expecting: Chandra, who also heads Tata Motors passenger vehicles as MD and CEO, said GST rationalisation, along with repo rate cuts and income tax benefits, will enhance accessibility and stimulate demand. “We are uniquely positioned to lead in high-growth segments, including the continued surge in SUV demand, alongside the accelerating adoption of CNG and EV technologies. Our strong portfolio across these categories places us squarely in the sweet spot of this market transition,” he said. On forthcoming regulations, he added, “While the exact contours of CAFE III have not been finalised, we earnestly believe that the government will articulate it in a manner that supports a directional shift towards sustainable technologies.” Mahindra & Mahindra Auto Division CEO Nalinikanth Gollagunta said the company will focus on operational excellence and innovation in 2026. “On the electric front, our focus is twofold: ramping up operational capacity to 8,000 eSUVs per month and strengthening the public charging ecosystem,” he said, adding that the coming year could be defining for Mahindra’s leadership in SUVs. From a broader perspective, EY-Parthenon Partner and Future of Mobility Leader Som Kapoor expects industry growth of 5–8 per cent in 2026. “With forthcoming regulations, such as BS7 and CAFE 2027 currently under active deliberation, 2026 will reveal long-term transition strategies for PV OEMs,” he said. Automakers across segments echoed confidence in demand conditions. Honda Cars India VP (Sales and Marketing) Kunal Behl said sustained SUV demand and gradual electrification would reinforce India’s status as a key global automotive market. Renault Group India CEO Stephane Deblaise called 2026 a pivotal year, citing the return of the Renault Duster and the impact of GST 2.0 reforms.Luxury cars will see price hikes? Luxury carmakers, while optimistic, flagged ongoing risks. Mercedes-Benz MD and CEO Santosh Iyer said GST 2.0 has had a strong impact on the economy but warned that deteriorating forex could push prices higher over time. BMW Group India president and CEO Hardeep Singh Brar said challenges such as rupee depreciation, tariffs and supply chain constraints could persist into early 2026, even as demand for personal luxury evolves.“We are growing faster than the average luxury car industry growth. I think the focus for 2026 for the luxury car industry should really be on increasing the size of the market. The size of the pie has been the same for far too long,” he added. Overall, the consensus across the sector is that 2026 will deliver continued growth, supported by policy tailwinds and consumption strength, but with outcomes increasingly influenced by regulatory preparedness, cost dynamics and how quickly buyers adapt to higher prices and emerging technologies.
