Auto Sector Outlook: Is March data the start of the growth story?

Synopsis: India’s auto sector ended FY26 strongly, led by robust growth in SUVs, EVs, exports and retail demand, with passenger vehicles, two-wheelers, commercial vehicles and tractors posting broad-based volume expansion.

The Indian auto sector closed FY26 on a strong footing, reflecting sustained demand across both urban and rural markets. March 2026 dispatch data showed healthy momentum across passenger vehicles, two-wheelers, commercial vehicles and tractors, supported by rising SUV demand, expanding EV adoption, infrastructure-led freight activity and strong exports. Improved affordability, lean inventory levels and resilient retail registrations further strengthened the sector’s outlook. The continued shift toward premium vehicles and electrification remains a key structural driver for the industry heading into FY27.

Passenger Vehicles (PVs)

Domestic passenger vehicle (PV) sales showed a strong trend in March 2026, with overall domestic volumes rising by ~15.8 percent  YoY to 4.47 lakh units, while FY26 growth stood at 8.4 percent  YoY. Maruti Suzuki’s PV volumes remained relatively muted due to production capacity constraints, growing 10.3 percent  YoY to 1.66 lakh units, with the compact segment up 7.3 percent  YoY and the mini segment remaining flat during the period.

M&M reported healthy performance as its domestic SUV volumes grew 25 percent  YoY and 19 percent  YoY in FY26, while Tata Motors delivered a strong 28.2 percent  YoY growth in domestic volumes and 14.1 percent  YoY in FY26, supported by solid demand in both ICE and EV segments. Hyundai recorded 6.3 percent  YoY growth but declined 2.3 percent  on a YTD basis, whereas Toyota saw 23.8 percent  YoY growth and 19 percent  FY26 growth, Kia posted 14.1 percent  YoY and 15.3 percent  FY26 growth, and JSW MG registered 18.7 percent  YoY and 18 percent  FY26 growth in March 2026. Honda, on the other hand, reported modest 4.9 percent  YoY growth while declining 4.8 percent  in FY26, reflecting mixed performance across the PV segment.

Two-Wheelers (2Ws)

The two-wheeler (2W) segment reported healthy growth in March 2026, with domestic volumes of major OEMs such as Honda, Royal Enfield, TVS, Hero, and Suzuki rising by ~17 percent  YoY and 12.5 percent  in FY26. Hero MotoCorp posted a modest 8.3 percent  YoY growth with 8.1 percent  YTD growth, while scooter demand remained significantly stronger than motorcycles, with scooters growing 53.2 percent  and motorcycles 5.1 percent  (including exports). 

TVS Motor continued its strong momentum, with domestic 2W volumes surging 25.1 percent  YoY to 3,72,383 units and 20.6 percent  growth in FY26, driven by scooters growing 30.9 percent  YoY, motorcycles 18.3 percent  YoY, and mopeds also rising 30.9 percent  YoY. Royal Enfield maintained solid domestic performance with 14 percent  YoY growth in domestic volumes, although exports declined by 8 percent  YoY, with demand mainly supported by the <350cc engine segment, while the >350cc segment grew 5 percent  YoY and 7 percent  in FY26, indicating steady premium segment traction.

Commercial Vehicles (CVs)

The commercial vehicle (CV) segment reported steady growth in March 2026, with domestic volumes of the top four OEMs rising by ~13 percent  YoY and 12.5 percent  in FY26. Tata Motors recorded strong performance with ~18 percent  YoY growth and 11.6 percent  YTD growth, supported by improvement across all segments, especially the bus segment which grew 31 percent  YoY. 

Ashok Leyland saw 5.5 percent  YoY growth and 12.5 percent  FY26 growth, driven by solid performance in MHCV and LCV segments, where LCV grew 16.8 percent  YoY and trucks grew 9.8 percent  YoY, although the bus segment declined sharply by 34.4 percent  YoY. M&M reported 11.2 percent  YoY growth and 13.3 percent  FY26 growth, with the LCV segment growing around 13 percent  YoY and SML Mahindra trucks and buses also rising about 13 percent  YoY. VECV delivered a strong performance in trucks, with domestic truck sales up 24.4 percent  YoY and 20 percent  in FY26, led by LMD (5–15T) growing 28.6 percent  YoY and HD (>15T) growing 17.7 percent  YoY, while the bus segment declined by 14 percent  YoY, indicating mixed demand across the CV space.

Electric Vehicle (EV) Momentum

EV penetration strengthened meaningfully during the month. In passenger vehicles, EV penetration rebounded to 5.0 percent , while in two-wheelers it reached an all-time high of 9.8 percent . Among electric two-wheelers, TVS held a 25.9 percent  market share, followed by Bajaj at 24.2 percent , Ather at 18.7 percent , Hero MotoCorp at 11.2 percent , and Ola at 5.3 percent . In electric passenger vehicles, Tata Motors maintained leadership with around 37 percent  market share, while JSW-MG and Mahindra each held approximately 23 percent . This continued acceleration reflects rising consumer adoption and broader electrification across vehicle categories. 

Tractor Segment

Mahindra remained the market leader in FY26 with 24.2 percent  market share, followed by Swaraj (Mahindra) at 19.1 percent  and TAFE at 11.5 percent . Mahindra gained 32 bps YoY, Swaraj improved by 7 bps YoY, and TAFE inched up by 6 bps YoY, highlighting stable leadership by Mahindra and steady positioning of Swaraj and TAFE in the overall tractor market.

Total tractor volumes in FY26 rose 18.5 percent  YoY to 10,30,878 units from 8,69,823 units in FY25. Mahindra recorded 2,49,914 units in FY26, up 20.1 percent  YoY from 2,08,123 units, while Swaraj (Mahindra) reported 1,96,908 units, growing 18.9 percent  YoY from 1,65,559 units. TAFE posted 1,18,314 units, marking 19.2 percent  YoY growth from 99,273 units, reflecting strong rural demand and consistent industry momentum.

Outlook

The near-term outlook for the Indian auto sector remains constructive, supported by improved affordability post GST 2.0, strong rural sentiment, continued SUV demand, and rising EV adoption. However, the report highlights risks from geopolitical tensions, potential fuel cost volatility and planned price hikes by OEMs, which could temporarily weigh on demand momentum. Systematix continues to prefer Mahindra and Tata Motors in PVs, along with TVS and Eicher Motors in 2Ws. 

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