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India’s domestic passenger vehicle (PV) volumes are expected to grow 4-6 per cent in FY27 supported by sustained demand momentum, even on a high base, a report said on Tuesday.

The report from ICRA said two?wheeler volumes are projected to grow 3-5 per cent YoY, and commercial vehicle volumes by 4-6 per cent.

Entry-level motorcycle demand continues to face pressure due to higher vehicle prices and affordability constraints at the lower end of the consumer pyramid. In contrast, premium motorcycles and scooters have witnessed a sharp recovery.

The ratings agency forecasted the automotive industry to witness a "normalisation in wholesale volume growth in FY27, following a period of elevated growth in the second half of FY26, driven largely by post-GST reform factors and favourable rural demand sentiments."

The wholesale PV growth is likely to grow by 5-7 per cent in FY26, supported by improved affordability following GST rate cuts, healthy replacement demand, and sustained preference for personal mobility, the report said.

It highlighted premiumisation and a rise in share of CNG, hybrids and electric vehicles as structural trends reshaping demand and technology adoption.

While demand fundamentals remain favourable, wholesale PV growth is expected to moderate to 4-6 per cent in FY27, given the higher base and relatively elevated system-level inventory, the report said.

The two-wheeler industry continues its gradual recovery, with growth estimated at 6-9 per cent in FY26, supported by healthy agricultural output, improved financing availability, and better affordability. However, the firm maintained that the growth is expected to normalise to 3-5 per cent in FY27.

“The first half in the current fiscal witnessed subdued demand while the second half is seeing a strong recovery on the back of policy support and healthy rural demand. Industry sales volumes have been robust over the past few months, aided by the GST rate cut, pent-up demand, supportive rural output, and conducive financing environment," said Srikumar Krishnamurthy, Senior Vice President & Co-Group Head - Corporate Ratings, ICRA.

Although demand sentiment remains optimistic, volumes touched levels that would weigh on the potential for outsized growth in FY27, Krishnamurthy added.