The voice about India’s car market staring at stagnancy is growing amid much selling by foreign investors in the stock market. Auto sticks of OEMs and suppliers have taken a beating lately. The reasons for stock market decline are said to be structural issues as well as geopolitical issues. In other words, they are local as well as global in their nature. The Indian auto industry – as the largest contributor of GST to the exchequer and among the highest contributor to the country's manufacturing GPD – is also quite local and global in its ways of working. 

Like any other developing nation, it is a market where the scope for an increase in automobile population is bright. It is also a market that is beset by structural issues nonetheless. With 34 cars owned per 1,000 people, the country with a population estimated to be 1,463,865,525 in 2025 has ample scope for auto sales growth. 

But as banks struggle for liquidity and a reduction in repo rate by the apex bank fails to reflect in the reduction of loan interest rates or equated monthly instalments, the structural issues facing the automobile industry are too stark to overlook.

Adding to the structural issues are perhaps developments such as the recent announecement by Maharashtra Government to levy six percent motor vehicle tax on premium electric vehicles. The leading industrialised state also has among the highest road toll taxes among other Indian states. The highway network in the state is among the most lacking and unsafe. Most roads in the state have either deteriorated or are under a seemingly unending period of repairs. 

The state government in its 2025 budget has also announced that it has raised the motor vehicle tax by one percentage point on individual-owned non-transport four-wheeler CNG and LPG vehicles. Such vehicles currently attract a seven to nine percent tax depending on their type and price.

While electricity costs have been rising with distribution companies like MSEDCL pushing for a revision in fixed and energy charges for various categories in order to bridge revenue gap, owning electric vehicles and CNG vehicles is becoming costlier though eco-friendlier.

Attracting over 200 percent in taxes, petrol and diesel prices have been at an all-time high. A timely upward revision in toll prices is only adding further to the cost of motoring in a country where close to or more than 50 of the vehicle purchase price amounts to taxes. Spares are also taxed at a hefty 28 percent and the labour costs have steeply risen post Covid-19 pandemic.

With vehicle prices being jacked up by automakers under the pretext of rising input costs by about four to five percent if not more, the Indian auto industry is clearly under pressure to maintain its margins and stay profitable.

Against the operating costs, the foot falls in the showroom are taking longer to realise into actual sales. Discounts are gaining speed and indicative of sales losing stream in some of the segments that were until recently doing very well.

Any excitement about a rebate in Income Tax up to INR 1,200,000 – it takes over INR 1,000,000 to purchase a decent car in India today – seeming to have faded into thin air, the talk about government announced a reduction in GST taxes has gained speed. When it would actually come into effect is yet to be known but the narrative has started building. The stock market does not look excited however and the money lost by domestic investors may take a long time to come back, it seems.

As US President Donald Trump speaks about exposing India’s ‘wrong’ tariff policies in the absence of any statement from the Indian government striking out his claims, the Indian market for automobiles and other consumer goods looks destined for a rough ride. Stagnancy will be a part of the plot, the repercussions of which would stem from domestic structural issues as well as geopolitical shifts where calls like ‘China Plus One’ hold no value at all anymore.

With the entry of Tesla – which has seen its sales and stock prices plummet in many of existing markets off late – set to enter India with the government lowering tariff under pressure from the US President, the subject of too much regulation needs to be examined in terms of structural strength and the industry’s ability to be competitive. Local manufacture is also a subject that needs to be looked at as MSME sector continues to shrink and take down with it the PMI index.

Skilling is also a subject that should be looked at as engineering courses lose interest with the young in the country. A manufacturing-less economy that is also witnessing the services sector face a slowdown – again due to structural and geopolitical issues – may not spell a good omen for growth in the long run. This, particularly in the case of a country whose median age in 29 years.

China’s ‘Deep seek’ has shown how the prowess in technology can shift overnight and highly influence the economy of a nation, its stock markets suddenly. In India, the auto industry should nurture the MSME sector as much as the government should. A services alternative in terms of growth over manufacturing may not hold forth in the long-term. Manufacturing exports can shrink abruptly anytime under the shifting regulatory and other market issues in the domestic marketplace and under the shifting geopolitical situations in various parts of the world that also make lucrative export markets.  

Image for representative purpose only. 

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Japanese automotive major Honda Motor Co., has announced organisational and operational changes effective 1 April 2026. The restructuring aims to enhance the company's ability to respond to market trends and deliver technologies within its automobile, motorcycle and power products divisions.

The research and development functions currently held within Automobile Development Operations and the SDV (Software-Defined Vehicle) Business Development Unit will be transferred to Honda R&D Co.

Since 2020, Honda has operated production model development and future technology research as separate entities. The new structure integrates the process from technology selection to market launch into a single flow. This change is intended to increase speed and flexibility in responding to the business environment.

Honda will disband the SDV Business Development Unit and reorganise its Automobile Business Strategy and Sales Units into two new entities: the Business Strategy Unit and the Regional Business Unit.

These changes are designed to:

• Improve automobile business profitability.
• Enhance product planning and sales based on customer needs.
• Strengthen product competitiveness over the mid-to-long term.

The company will integrate sales, business strategy and product development functions for its electric and internal combustion engine (ICE) businesses. Previously, these were managed separately. As the electrification strategy enters the execution stage, this integration aims to optimise resource allocation and support carbon neutrality goals.

Through these changes, Honda intends to accelerate corporate transformation through electrification and intelligent technologies to maintain a distinctive presence in the global market.

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The company is building a 1,000-acre greenfield complex in Nagpur to unlock SUV and tractor capacity as demand across segments begins to outpace supply at its existing plants. The facility will anchor a phased expansion plan even as the company revises tractor growth outlook sharply higher and races to ease production bottlenecks.

Mahindra and Mahindra’s upcoming greenfield complex at Nagpur will be spread across more than 1,000 acres and anchor the automaker’s next phase of capacity expansion with room for 500,000 SUVs and 100,000 tractors annually in a modular, phased build-out starting 2027-28.

The plant, which will also house a dedicated tractor facility within the same campus, is being designed to flex production between new-generation SUVs from Mahindra’s upcoming platforms and rising tractor volumes as the company prepares for sustained demand across segments.

“The Nagpur project gives us the flexibility to scale in a modular way across both SUVs and tractors without overcommitting capacity on day one,” said Chief Executive Officer, Auto and Farm Sector, Rajesh Jejurikar.

The expansion comes amid visible supply constraints at existing facilities in Chakan and Nashik, where strong demand for refreshed models such as the 3XO, Bolero range, Scorpio N and the newly introduced electric SUVs has pushed plants close to their limits.

Mahindra expects de-bottlenecking efforts to unlock an additional 3,000-5,000 units a month in internal combustion models by August-September, alongside 3,000-4,000 units of added EV capacity through the year.

The company said dealer inventory currently stands at 15–20 days, well below its preferred 25–30 day range, reflecting tight supply rather than demand weakness.

Demand momentum has also prompted Mahindra to sharply revise its tractor industry outlook. What was earlier guided as “low double-digit” growth for the year is now expected to land in the 22–24 percent range.

“We had underestimated the strength of the tractor industry. It is likely to be almost twice of what we had originally guided,” Jejurikar said.

On the passenger vehicle side, Mahindra stopped short of offering formal guidance for the next quarter or fiscal year but indicated that industry demand remains robust, with supply rather than orders becoming the limiting factor.

“I think everyone is going to be constrained by capacity because demand right now is stronger than the way supply is able to ramp up,” Jejurikar added.

The automaker is also seeing strong traction for its latest SUV launches. The XUV 7XO is witnessing higher bookings for top-end variants, continuing a trend seen in the XUV700, while the newly introduced electric SUV 9S is drawing customers seeking a more conventional seven-seat SUV format. Diesel continues to account for 70–75 percent of demand for the 7XO.

Jejurikar said there will be no new EV launches in calendar 2026 beyond the already introduced models, with capital expenditure tracking previously announced plans of INR 270 billion over three years, including INR 120 billion earmarked for new electric vehicle platforms.

On the financial side, Mahindra’s standalone results reflected a INR 3.75 billion loss from investments in subsidiaries, associates and joint ventures, up fourfold year-on-year. This was primarily due to impairments in Mahindra’s Japanese arm, which is undergoing restructuring, and Arkun Foundry in Turkey, hit by hyper-inflationary conditions.

“The impairment is largely related to the restructuring of our Japan operations and the impact of hyper-inflation in Turkey on Arkun Foundry,” said Group Chief Financial Officer Amarjyoti Barua.

Jejurikar also pointed to external factors driving cost pressures, particularly rising precious metal prices and currency movements, prompting a 1 percent price increase in the auto portfolio.

“Precious metals and the impact of the dollar are the two key areas where we are seeing tangible increases,” Barua said.

Mahindra’s leadership also sees an opportunity emerging from recent trade agreements. While dismissing concerns that European imports could undercut domestic manufacturing, the company believes the new framework opens a pathway for higher exports of India-made vehicles to Europe at zero duty over time.

“There is an opportunity for us to sell meaningfully more into Europe over time at zero duty, and that is something we will take advantage of,” said Jejurikar.

Group Chief Executive Officer Dr Anish Shah added that broader policy changes, such as GST rate cuts, could have a sustained demand impact beyond immediate price benefits.

“A lower upfront cost for customers will continue to stimulate upgrades and first-time purchases over the longer term,” Dr Shah said.

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The Federation of Automobile Dealers Associations (FADA) has released the retail sales data for January 2026, which saw the overall industry report a healthy 17.61 percent growth over January 2025.

Last month, a total of 2.72 million vehicles were sold, as compared to 2.31 million vehicles a year ago, and 2.02 million in December 2025. Barring construction equipment (-21.09 percent YoY), all segments posted a healthy growth.

Two-wheeler sales in the country grew by 20.82 percent YoY to 1.85 million units, which saw rural markets contributed 56 percent of this volume, while urban demand grew by 22.19 percent, indicating a recovery beyond festive periods. The passenger vehicle sales at 513,475 units, up 7.22 percent YoY was primarily driven by rural demand at 14.43 percent, as compared to 2.75 percent growth witnessed in the urban segment.

Commercial Vehicles segment grew 15.07 percent to 107,486 units, which saw Light Commercial Vehicles (LCV) grow by 14.94 percent YoY and Heavy Commercial Vehicles (HCV) by 14.61 percent YoY, driven by replacement demand and infrastructure projects.

C S Vigneshwar, President, FADA, said, “January’26 has delivered a strong, broad-based start to the calendar year, with overall vehicle retail at 27,22,558 units, registering 17.61 percent YoY. The growth was powered by continued post-GST momentum, healthy rural cashflows on the back of harvest and weddings and sustained demand visibility across mobility and freight.”

Growth to remain positive

The outlook for February 2026 remains positive, with 72.56 percent of dealers expecting continued growth. Market sentiment is supported by the recent Budget’s focus on infrastructure and agriculture, alongside stable interest rates.

For the February-April period, 79.70 percent of dealers anticipate growth. Two-wheeler demand is expected to be sustained by wedding season purchases and EV adoption, while commercial vehicle sales are predicted to benefit from financial year-end buying and infrastructure activity. Potential constraints include model-specific supply shortages and possible disruptions related to upcoming elections in select states.

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The Society of Indian Automobile Manufacturers (SIAM) held the 20th Styling & Design Conclave and the 18th Automotive Design Challenge (ADC) in Goa on the theme of ‘Collaborative Creativity: Building India’s Mobility Design Ecosystem’.

The event gathered designers, industry experts and academics to discuss vehicle aesthetics, form and consumer expectations. During the event, SIAM launched a white paper titled ‘Evolution of Automotive Design in India.’

The conclave focused on the necessity of building design capabilities through partnerships between the automotive industry and academic institutions.

The 18th edition of the ADC featured 53 students from various design colleges. Participants presented concepts focused on future mobility needs, providing a platform for entry-level designers to showcase innovation in vehicle styling.

Speakers across two sessions addressed the integration of aesthetics with functionality, material innovation and sustainability. Discussions highlighted the shift toward design-led differentiation in the Indian market.

Prashant K Banerjee, Executive Director, SIAM, said, “Meaningful mobility solutions emerge from the confluence of sustainability, desirability, and affordability. These three essential pillars that must work together to address local needs while aligning with evolving environmental priorities.”

G Sathiyaseelan, Chairman, SIAM Styling & Design Group and Design Director, Ashok Leyland, said, “Understanding user experience must go beyond acknowledging problem areas and be rooted in empathy and a solution-driven mindset, with a clear focus on enabling gender-sensitive transportation and strengthening last-mile connectivity to create truly inclusive mobility solutions.”

Andreas Kurbos, Founder & CEO, StudioKurbos, added, “As design continues to evolve globally, India’s story can achieve stronger resonance by drawing from its rich culture and legacy. With design tools becoming increasingly democratised, identity becomes a powerful differentiator, making it essential to deeply understand audiences and co-create distinctive user experiences, while strengthening design education to shape the future of design.”

Saurabh Singh, Co-Chairman, SIAM Styling & Design Group and Senior VP, Maruti Suzuki India, added, “Shaping India through thought-provoking and emotionally engaging dialogue is essential to spark deeper conversations and meaningful action, and the country must set its sights on a bolder, more ambitious vision for its automotive future.”

The sessions included contributions from design leads at Maruti Suzuki, Tata Motors, Stellantis, Royal Enfield, Greaves Electric Mobility and Kiska. Topics included the use of bio-sourced polymers, digital modelling and the development of next-generation styling for electric vehicles.

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