After a Turbulent Year, India’s Auto Sector Sees the Road Clearing Ahead

After a rollercoaster year marked by policy uncertainty, geopolitical shocks and shifting consumer preferences, India’s automobile industry is entering 2026 with renewed confidence. A rare alignment of macro tailwinds—back-to-back repo rate cuts, income tax relief in the Union Budget and sweeping tax reforms under the GST 2.0 regime—has set the stage for what could be the sector’s strongest phase in years.

The optimism was on full display at Maruti Suzuki’s latest monthly sales press conference. India’s largest carmaker now expects the passenger vehicle (PV) industry to grow at a healthy 6–7% by March 2026, a sharp reversal from the muted outlook that prevailed just months ago.

“These tailwinds will continue in the times to come. And if the monsoon remains favourable next year as well, there is no reason the auto industry should not grow at 6–7%,” said Partho Banerjee, senior executive officer at Maruti Suzuki.

2025 proved to be a year of churn for the auto industry. While Maruti Suzuki retained its dominant position with a market share of over 40%, the battle for the second spot intensified dramatically. SUV specialist Mahindra emerged as the year’s runner-up with a 13.3% share, overtaking long-time number two Hyundai.

Beyond market share battles, the industry grappled with deeper structural challenges. The year began with a shortage of rare-earth-based motors—critical components for modern vehicles, especially electric ones. The disruption exposed India’s dependence on concentrated global supply chains and underlined the urgency of developing local alternatives.

Geopolitical tensions added to the uncertainty, while disagreements over future emission norms spilled into the public domain, leading to rare and open disagreements between carmakers.

What lies ahead

Towards the end of the year, relief finally came in the form of GST reforms, which the industry widely credits for reviving consumer sentiment.

“GST has created a long-term structural shift, not just a short-term spike. For the first time in decades, customers have seen car prices actually go down, and that expands the market,” says Ashish Gupta, brand director, Skoda Auto India.

The numbers reflect that turnaround. Industry estimates suggest that over 4.5 million cars were sold in 2025, up from about 4.3 million units a year earlier.

Looking forward, carmakers expect the momentum to carry into 2026. Maruti Suzuki is betting that GST relief will help revive demand for small cars—long seen as the entry point for first-time buyers and a key indicator of market expansion.

At the same time, SUV-focused players such as Mahindra and Tata Motors believe the segment will remain fiercely competitive, driven by favourable taxation and a strong consumer tilt toward larger vehicles.

Recent launches of new models and facelifts are expected to further fuel growth. Maruti’s Victoris and upcoming e-Vitara, Tata’s much-awaited Sierra, Mahindra’s XEV 9S, and refreshed models like Hyundai’s Venue and Kia’s Seltos will energise the market across powertrains, according to experts.

Yet, risks remain. Industry experts caution that geopolitical uncertainty and India’s limited self-reliance in critical components could temper growth.

Recent US tariff actions may be contained through trade agreements, but Mexico’s move to impose higher import duties could hit Indian auto exports in the near term. Mexico remains one of the largest export destinations for India-made vehicles.

“The impact of US tariffs is expected to be contained, but Mexico’s tariffs can hurt exports in the short term,” said an industry analyst.

For now, however, the road ahead looks smoother than it has in years. With policy support, easing interest rates and a reviving consumer base, the Indian automobile industry appears ready to shift into a higher gear.