SUVs to Fuel PV Growth in FY26 as OEMs Stay Cautious on Overall Demand: Industry Sources

India’s passenger vehicle (PV) market is anticipated to experience modest growth of 1-2% in FY26, with sport utility vehicles (SUVs) playing a pivotal role in driving this expansion, as per insights from leading automakers shared in a closed-door industry discussion, CNBC TV-18 reported. SUVs are expected to outpace the broader market, growing at an estimated 8%, driven by increasing demand for spacious and feature-rich vehicles.

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Stock Market Performance of Auto Companies

At around 11 AM IST, Maruti Suzuki Share Price was trading at ₹12,404, marking a 2.2% decline. Hyundai Motor India’s share price also saw a 2% dip, trading at ₹1,839.

Conversely, Tata Motors’ share price witnessed a 1.2% rise to ₹689, while Mahindra & Mahindra’s share price—2024’s best-performing Nifty stock—climbed 2% to ₹2,810.

The Nifty Auto index edged up nearly 1% during today’s session, although it has dropped approximately 14% over the past six months.

Automakers' Growth Projections

Among key players, Maruti Suzuki and Hyundai predict overall PV industry growth of around 1-1.5% in the upcoming fiscal, whereas Tata Motors holds a slightly more optimistic outlook, projecting a rise of 2-4%. Meanwhile, Mahindra & Mahindra expects PV sales to grow by 1-2% but foresees its utility vehicle (UV) segment expanding in line with the SUV trend at 8%.

The cautious growth projections stem from various factors, including a high base effect, shifting consumer sentiment, and macroeconomic uncertainties. However, SUVs continue to be a standout segment, maintaining stronger momentum as buyers increasingly prefer premium models with advanced features and a commanding road presence.

Auto Retail Sector Outlook

As 2025 begins, the Auto Retail sector entered February with measured optimism following a strong January. A recent survey by the Federation of Automobile Dealers Association (FADA) revealed that 43% of respondents expect sales to remain stable, while 11% anticipate a slight decline.

Concerns over reduced working days, weaker rural liquidity, and inflationary pressures persist, adding to uncertainties around the market’s growth potential. Additionally, stringent lending conditions, rising vehicle prices, and subdued demand in certain industrial sectors are also contributing to the sector's challenges.

Long-Term Growth Drivers and Challenges

Despite these challenges, the long-term outlook for the Indian automotive market remains positive. Automakers are investing heavily in new product launches, electric vehicle (EV) development, and technological advancements. Several car manufacturers are introducing hybrid and electric SUVs to cater to evolving consumer preferences and regulatory requirements aimed at reducing carbon emissions. With government incentives and an expanding EV charging infrastructure, industry experts believe that the electrification of the SUV segment could become a key growth driver in the coming years.

Furthermore, rising disposable income, rapid urbanization, and a growing preference for high-end, feature-loaded vehicles are expected to sustain SUV demand. Automakers are also focusing on improving supply chain resilience and production efficiency to mitigate the impact of economic fluctuations.

Future Outlook for the Auto Industry

Looking ahead, industry analysts expect the auto sector to benefit from an improving economic environment, potential interest rate cuts, and increased infrastructure spending, which could boost demand for both passenger and commercial vehicles. However, challenges such as regulatory changes, fuel price volatility, and geopolitical uncertainties could continue to influence market dynamics.

The industry’s ability to adapt to changing consumer preferences, accelerate EV adoption, and manage economic headwinds will determine the trajectory of growth in the coming years.