India's automobile industry has entered a decisive growth phase, recording unprecedented sales of 26.8 million vehicles in 2025, representing approximately 5% year-on-year growth. The surge was driven by robust demand across passenger vehicles, two-wheelers, and three-wheelers, establishing new industry benchmarks. Major automakers are responding with aggressive capacity expansion plans to capture both domestic and international opportunities while positioning India as a global manufacturing hub.

Record Sales Performance

The industry's strong performance in 2025 reflects broad-based growth across multiple segments:

Major Capacity Expansion Plans

Maruti Suzuki is anchoring its expansion strategy around Gujarat with comprehensive facility upgrades. The company plans a new greenfield passenger vehicle plant at Khoraj with capacity reaching up to 1 million units by FY29. Additionally, Maruti is expanding its Hansalpur facility from 750,000 to 1 million units while scaling up Kharkhoda from 250,000 to 500,000 units.

Hyundai Motor India, currently operating with 8,24,000 units capacity, is expanding through its Talegaon plant in Maharashtra. The facility has added 1,70,000 units and is scalable to 2,50,000 units by 2028, pushing total India capacity beyond 1 million units annually.

Tata Motors Passenger Vehicles operates approximately 900,000 units of capacity across Pune and Sanand facilities, scalable to 1 million units. The company is developing a new Ranipet plant in Tamil Nadu that could add up to 250,000 units over four to five years.

Mahindra & Mahindra, India's second-largest carmaker, is expanding capacity at its Chakan plant by 240,000 units while upgrading production lines to support both EV and ICE platforms. With current capacity of 8,20,000 units, total capacity is expected to exceed 1 million units within the next two years.

Strategic Focus Areas

Automakers are preparing for multi-layered demand scenarios driven by rising domestic incomes, improving road infrastructure, and higher vehicle penetration rates. The industry has planned nearly 80 new model launches this decade across internal combustion engine, hybrid, and electric vehicle technologies, requiring assured production capacity.

Key Strategic Initiatives:

• Supply-chain resilience and component localization
• Platform-sharing strategies to control costs
• Future-proofing plants for accelerating EV demand
• Export market expansion in emerging and selective developed markets

Policy and Trade Developments

The India-EU FTA discussions add strategic dimension to capacity planning, with expected tariff reductions on electric vehicles potentially boosting bilateral trade. The government is reviewing the SPMEPCI scheme, which currently relies on import duty concessions with zero participation. A potential shift toward direct manufacturing-linked incentives could attract global EV manufacturers to establish local production facilities rather than importing vehicles.

These expansion efforts reflect industry confidence that India will assume a larger role in global automotive and EV supply chains, positioning current capacity investments as foundations for long-term industrial and export-led growth.

India's automotive industry is closing the year with strong momentum across multiple segments, driven by favorable market conditions and supportive government policies. According to Nomura's latest report, the sector is benefiting from GST cuts, wedding season demand, and steady freight activity that is keeping both showrooms and transporters active.

Passenger Vehicles Show Broad-Based Strength

The passenger vehicle segment is experiencing healthy demand fundamentals with strong dealer inquiries and showroom walk-ins. Interest remains particularly robust in higher-end models, while year-end discounts are helping drive conversions. New product launches are generating significant attention, with Maruti Suzuki's electric Vitara and Tata Motors' Sierra drawing healthy booking pipelines from dealers.

The passenger vehicle industry wholesales are expected to grow strongly in December, with manufacturers benefiting from both domestic demand and improved market positioning.

Two-Wheeler Segment Set for Robust Growth

The two-wheeler industry is headed for robust year-on-year growth in December, supported by multiple positive factors. Better affordability following GST cuts and wedding-related purchases are driving demand significantly. After experiencing a weak base last year, retail activity has improved meaningfully, with manufacturers expecting this momentum to continue into the next financial year.

Key Growth Drivers:

• GST cuts improving affordability
• Wedding season purchases
• Export recovery
• Improved retail activity

Bajaj Auto, TVS Motor, and Hero MotoCorp are all expected to report healthy increases, while Royal Enfield volumes are also likely to rise meaningfully. However, regulatory changes around ABS norms for sub-125cc bikes remain a monitoring point, particularly for Hero MotoCorp given its significant exposure in this segment.

Commercial Vehicles Show Revival Signs

The commercial vehicle market is displaying clear signs of revival, with higher freight rates and improved fleet operator profitability encouraging fresh purchases and replacements. In the medium and heavy commercial vehicle segment, industry wholesales are expected to rise, with both Ashok Leyland and Tata Motors' commercial vehicle business posting growth.

This performance reinforces the view that the commercial vehicle upcycle is gaining strength, supported by steady freight activity and better operational economics for fleet operators.

Electric Two-Wheelers Gain Ground

Electric two-wheelers continue to expand their market presence, with established players maintaining healthy market shares. TVS Motor, Bajaj Auto, and Ather Energy are sustaining their positions in the electric segment, while some other players are experiencing volume moderation.

Tractor demand remains healthy, supported by good reservoir levels, favorable farm cash flows, and seasonal agricultural activity. GST cuts have also contributed to improved sentiment in rural markets.

Market Outlook

December appears strong for the automotive sector overall, with cars, two-wheelers, commercial vehicles, and tractors all benefiting from supportive demand drivers. The combination of policy support through GST cuts, seasonal factors, and improving economic fundamentals is creating a favorable environment for sustained growth across the industry.