Festive season, rural recovery to drive auto sales in H2 FY26: SIAM

India’s passenger vehicle and two-wheeler segments are set to receive a demand boost in the second half of FY2025-26, aided by the upcoming festive season and a likely rural recovery, according to the latest quarterly report by the Society of Indian Automobile Manufacturers (SIAM).

The report points out that the festive season, traditionally a high-sales period for the auto sector, is expected to improve consumer sentiment further. A forecast of above-normal monsoon rains is likely to bolster rural incomes, potentially benefiting two-wheelers and entry-level vehicles — segments highly reliant on rural demand.

Additionally, the Reserve Bank of India’s cumulative repo rate cuts of 100 basis points over the last six months are expected to gradually reduce borrowing costs, thereby enhancing affordability for consumers.

However, the sector continues to face supply-side pressures, particularly due to China's export licensing requirement for rare earth magnets — a critical input for many Original Equipment Manufacturers (OEMs).

Key Q1 FY26 Highlights:

Passenger Vehicle Sales:
The segment crossed the 1 million mark for the second consecutive year in the first quarter, with total sales reaching 1.01 million units. Utility Vehicles (UVs) continued to dominate, capturing 66% of the market and registering a 3.8% year-on-year growth. In contrast, passenger car sales declined by 11.2%.

Exports:
Passenger vehicle exports hit an all-time Q1 high of 2.04 lakh units, up 13.2%, driven by strong demand from the Middle East, Latin America, and recovery in FTA and neighbouring markets.

Two-Wheelers:
Sales stood at 4.67 million units in Q1 FY26, marking a 6.2% decline, largely due to inventory corrections. Despite this, retail demand rose 5% owing to the marriage season. Two-wheeler exports surged 23.2% to 1.14 million units.

Three-Wheelers:
The segment reported its best-ever Q1 performance, selling 1.65 lakh units — a marginal 0.1% rise — mainly driven by passenger carriers and expanding economic activity. Exports jumped 34.4%.

Commercial Vehicles:
Sales dropped slightly by 0.6% to 2.23 lakh units in Q1, while exports grew 23.4%.

With festive demand, improved liquidity, and a stable rural outlook, SIAM projects an optimistic trajectory for the auto industry in the coming quarters — although global supply constraints remain an area to watch.