New Delhi [India], February 26 (ANI): India's automobile sector is expected to witness a mixed performance in FY2026, with moderate growth in passenger vehicles (PVs), steady demand for two-wheelers (2Ws), and continued momentum in the tractor segment, according to Kotak Institutional Equities report

The domestic PV industry is projected to grow in the low single digits year-on-year in FY2026, following a flat growth trend in FY2025.

The report mentioned, 'According to SIAM and domestic OEMs, domestic PV industry wholesale volumes are expected to grow low single digits yoy (flat yoy growth in FY2025E) in FY2026E, driven by steady growth in the SUV segment due to newer launches and an increase in BEV segment penetration, partly offset by continued weakness in entry-level segment demand and a high base effect.'

However, weak demand in the entry-level segment and the high base effect from previous years could limit the overall expansion. Experts estimate PV industry volumes to grow by 3-5 per cent, with SUVs/MUVs witnessing 6-8 per cent growth, while hatchbacks and sedans may see 3-4 per cent growth.

The two-wheeler segment is expected to grow by 6-9 per cent YoY in FY2026, largely supported by strong demand for scooters due to increasing urbanization and rising preference for premium motorcycles above 125cc.

On the export front, the recovery trend continues, with strong demand coming from Latin America (LATAM) and improvements in the African market. This positive momentum in overseas markets is likely to support the overall growth of the two-wheeler segment.

The medium and heavy commercial vehicle (M&HCV) segment presents a mixed outlook. While some automakers anticipate mid-single-digit growth, auto ancillary players expect this segment's growth to remain flat in FY2026.

Despite this, commercial vehicle manufacturers remain optimistic about sustaining their margins, thanks to pricing discipline, an increasing contribution from non-CV revenue streams, and stable commodity prices.

The tractor industry is set to maintain its strong growth trajectory in the coming quarters, driven by favourable agricultural conditions.

Key factors supporting this trend include higher Rabi sowing acreage, improved reservoir levels, and favourable Minimum Support Prices (MSP), which have strengthened farmers' purchasing power. OEMs expect this demand momentum to continue into the first half of FY2026.

The auto component industry's growth prospects remain closely tied to vehicle demand. While demand from domestic markets remains stable, a slowdown in certain export markets could affect the revenue growth of select auto ancillary players. (ANI)