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Auto Volumes hit a new high in FY26 fuelled by GST rate cuts

ICICIdirect Research 03 Apr 2026 DISCLAIMER

FY26 ends on a high note with double digit growth across all vehicle categories for March 2026 and industry making a new high in terms of total vehicles dispatches for FY26E.
It was actually a tale of two halves with H1FY26 being muted and H2FY26 coming in robust post GST rate cut announced by the government and it being perfectly coinciding with the onset of festive season i.e. 22nd September 2025, just before Dusshera-Diwali.
As per our estimates total domestic volumes for the industry rose 10% YoY to ~2.9 crore vehicles in FY26 vs. a last best of ~2.7 crore units clocked in FY19.
Key outperformer this time around was the tractor domain with reported nearly 24% volume growth in FY26 with total volumes pegged at ~12 lakh units, a new high
2-W space also witnessed a good comeback with ~10% volume growth for the year at ~2.2 crore units, a new high
PV space performed well on a high base with ~8% yearly volume growth at ~47 lakh units.
Real surprise was revival in CV space, which posted ~13% volume growth for the industry and clocking all time high volumes of ~11 lakh units.
In terms of OEM performance for FY26, M&M set the bar high, outperforming in the PV space (with 20% volume growth) as well as Tractor segment (with 24% volume growth).
TVS motors & Eicher Motors outperformed in the 2-W segment with similar 23% YoY in sales volume in FY26, while mass segment players reported high single digit growth at ~9%.
In the CV space, Tata Motors led the growth charge with 14% volume growth with volume recovery witnessed across M&HCV as well as LCV domains.
Exports was also a key highlight for FY26 with all OEM’s posting healthy double digit volume growth ranging from 16-80% YoY with 2-W OEM in particular reporting record export volumes
Going forward, OEM’s have still not flagged concern on the demand side amidst ongoing geo-political issues, however supply side challenges on the logistics front as well as key commodity price led pressure on gross margins is likely to emerge. In response to it, some OEM’s have announced price hike to mitigate the partial impact of RM increase.
We are positive on the Auto space with top bets as Maruti Suzuki (BUY; Target: ₹17,650), M&M (BUY; Target: ₹ 4,500) and Bajaj Auto (BUY; Target: ₹ 11,420) in the OEM space.
With Auto Index down substantially ~16% in the aftermath of global conflict, we see this as a structural opportunity to increase exposure given the fundamentals of low vehicle penetration, rising income levels and upcoming 8th pay commission. Underlying premiumization trend remains unabated. Sector is well poised for double digit value growth going forward.

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