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Passenger vehicle (PV) sales in India are projected to grow at a moderate pace of 4-7% in FY26, with demand drivers remaining largely neutral or favourable, according to ratings agency ICRA. The industry reached an all-time high of 4.2 million units in FY24, while YTD FY25 growth has remained modest at around 2%, due to waning replacement demand and high inventory levels. ICRA notes that while healthy retail sales have eased dealer inventory pressure in recent months, stock levels remain moderately high. For FY25, the agency expects PV growth to remain subdued at 0-2%, with factors such as disposable incomes, new model launches, and cost of ownership playing a neutral to positive role in future demand. The two-wheeler (2W) industry, on the other hand, is set to grow at a healthy 6-9% in FY26, following an estimated 11-14% growth in FY25. The sector has witnessed strong recovery, with YTD FY25 growth at approximately 10% year-on-year, driven by improved rural demand and healthy monsoon precipitation. A reduction in income tax burden post recent budget changes is also expected to boost disposable incomes and further stimulate demand. In the commercial vehicle (CV) segment, growth is expected to remain marginal in FY26. Economic activity improvements, increased infrastructure spending, and government policies like the vehicle scrappage initiative are likely to drive replacement demand. However, light commercial vehicles (LCVs) may see slower growth due to competition from electric three-wheelers and a slowdown in e-commerce. ICRA estimates growth of 0-3% for medium and heavy commercial vehicles (M&HCVs), 3-5% for LCVs, and 8-10% for buses in FY26.