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According to Crisil Ratings, the passenger vehicle industry in India is expected to reach a record cumulative domestic and export volume of 5 million units this fiscal year, despite a slowdown in the annual growth rate to 2-4 per cent. However, the penetration of electric vehicles (EVs) is forecasted to remain moderate at 3-3.5 per cent, despite new launches and declining battery costs. High prices, limited charging infrastructure, and range anxiety are factors that are limiting the market to urban users, especially as a second car option. Crisil Ratings also noted that the growth in the EV segment has decelerated after doubling last year, largely due to a low base. The ratings agency reported that India's passenger vehicle industry is poised to achieve a new record this fiscal, with domestic and export volumes expected to exceed 5 million units, even though the annual growth rate is projected to slow to 2-4 per cent. This represents the fourth consecutive year of record sales, although the momentum has significantly eased from the 25 per cent surge in fiscal 2023 following the pandemic. The domestic market is expected to account for around 85 per cent of the total volume, with exports making up the remainder. On the EV front, Crisil Ratings indicated that growth had slowed after doubling the previous year, but from a low base. The entry of global premium EV models, including Tesla, is expected to increase competition in the premium segment, which constitutes less than 10 per cent of the overall volume. This is likely to reset consumer expectations across categories and prompt Indian Original Equipment Manufacturers (OEMs) to speed up technology upgrades. However, Crisil Ratings also pointed out that high tariffs would limit imports. Looking ahead, the pace of interest rate cuts, EV adoption, and potential supply shocks—such as disruptions in the availability of chips and battery cells due to global tensions—will require careful monitoring. Anuj Sethi, Senior Director at Crisil Ratings, stated that while passenger vehicle growth will moderate to 2-4 per cent this fiscal, utility vehicles (UVs) are expected to continue growing at around 10 per cent, supported by new launches. He noted that with UVs contributing 68-70 per cent of volumes and most upcoming models, the shift toward premiumisation is structural. Sethi also mentioned that rural recovery, expected from a likely above-normal monsoon and interest rate reductions, should boost demand for entry-level cars. On the export front, Crisil Ratings forecasted that growth will likely slow to 5-7 per cent in FY26, a decline of one-third due to global headwinds. The 25 per cent US tariff, effective June 2025, poses limited risk since the US accounts for only about 1 per cent of total passenger vehicle volumes. The report further stated that OEMs can shift to alternative markets such as Mexico, the Gulf countries, South Africa, and East Asia, although on-going geopolitical tensions may weigh on export growth. News source: Business Standard