Auto volumes to cool in FY27 as GST tailwind fades, say rating agencies

India’s automotive industry is expected to settle into a steadier growth phase in FY27 after the GST-led rebound in the second half of FY26, according to reports by Crisil Ratings and ICRA.Crisil said two-wheeler volumes could rise 7–9% in FY27, taking total dispatches past 2.9 crore units. Domestic demand, which contributes nearly 80% of industry volumes, is likely to remain stable on improved affordability following GST rationalisation, while exports are set to outpace the home market for a third straight year.

An analysis of six original equipment manufacturers accounting for about 95% of industry volumes underpins the outlook.
Exports, contributing around 20% of total volumes, are projected to grow 21–23% this fiscal and sustain mid-to-high teen growth in FY27, led by Latin America, Africa and South Asia.Anuj Sethi, Senior Director at Crisil Ratings, said domestic two-wheeler volumes may grow 6–8% in FY27. Motorcycles, accounting for around 60% of domestic volumes, are expected to post mid-single-digit growth. Incremental gains are likely to come from scooters, with early double-digit growth overall and mid-teen expansion in e-scooters, driven by urban usage and last-mile mobility needs.

Crisil expects revenue growth of 10–12% next fiscal, largely volume-led, with operating margins sustaining at about 16% despite elevated aluminium and steel costs. Healthy internal accruals are projected to fund capital expenditure of around ₹6,000 crore in FY27, while keeping leverage low.Also Read: Passenger vehicle dispatches hit record 4.5 lakh units in January, up 12.6%: SIAM

Moderation visible across segments

ICRA sees a broader normalisation trend. It expects passenger vehicle wholesale volumes to grow 4–6% in FY27, down from an estimated 5–7% in FY26. Two-wheeler growth is pegged at 3–5%, while commercial vehicle volumes are projected to expand 4–6%, with buses relatively better placed at 7–9%.

Srikumar Krishnamurthy, Senior Vice President at ICRA, described FY26 as a “tale of two halves”, with a subdued first half followed by a strong recovery supported by GST cuts, pent-up demand and healthy rural output. He cautioned that while sentiment remains optimistic, elevated base levels could limit outsized growth in FY27.

Premiumisation and rising electric vehicle penetration remain structural themes, even as rural income trends, commodity prices and export demand will be key to sustaining momentum.

Also Read: India sells 27.23 lakh vehicles in Jan; two-wheelers grow 21% YoY, passenger cars up 7%