After record passenger vehicle sales in the first four months of 2026, Moody’s Ratings expects light vehicle sales in India to increase 7% this year and 5% in 2027 amid weakened consumer confidence.

The ongoing West Asia conflict, which increased energy prices, weakened consumer confidence, and limited the possibility of more interest rate cuts, will further stifle vehicle sales, Moody’s said in its Global Auto Manufacturing Outlook.

Car sales rose about 20% year-on-year through the first four months of 2026, as Goods and Services Tax (GST) rate rationalisation, interest rate cuts and income tax relief materially improved vehicle affordability and financing conditions. “We expect this growth to moderate as the demand surge from these policy measures stabilises,” noted Moody’s.

Any acceleration in pass-through of higher crude oil prices would weigh on demand for internal combustion engine vehicles, it said.

“While elevated fuel prices may encourage a transition to electric vehicles, they currently represent only about 6% of passenger vehicle sales — significantly less than the government's target of 30% by 2030, limiting substitution in the near future,” it pointed out.

India’s passenger vehicle market expanded by 8% year-on-year in FY26, with sales reaching an all-time high of 4.7 million units, up from 4.3 million units in the previous financial year.

Moody’s outlook for the global automotive industry remains negative. Tariffs, trade disputes and the unresolved conflict in the Middle East are combining to diminish economic growth, it says. That complicates the picture for a sector already struggling with balancing the shift to electrification from internal combustion engines.

Moody’s expects global light vehicle sales to rise only moderately to around 92.3 million vehicles this year. This represents an increase of 0.3%, from around 92 million vehicles sold in 2025. “We do not expect any significant recovery in 2027 and forecast sales growth of just 0.5% globally to 92.8 million units,” the ratings agency said.

Published on: Jun 2, 2026 7:18 PM IST