File picture of cars parked at Maruti Suzuki’s plant in Manesar, Haryana
| Photo Credit: Reuters
Moody’s Ratings has doubled its forecast for India’s light vehicle sales growth in 2026 to 5%, citing policy changes, including the recent Goods & Services Tax (GST) reduction.
“In India, we expect light vehicle sales to increase 5% this year and next, up from our previous forecast of 5% growth this year and only 2.5% growth in 2026,” the rating agency said in a report.
“Policy changes, including recent tax reductions and lower vehicle prices, support demand in this price-sensitive market,” it added.
During the last festive season and following the cut in the GST rate, all automobile companies reported robust sales of small cars that now attract a 18% GST. According to them the trend would continue.
EVs account for 7%
Stating that demographic factors such as the country’s young population and low car ownership rate remained long-term demand catalysts, the rating agency said electrification, however, remained slow.
“Compared to the government’s target of electric vehicles (EVs) comprising 30% of new car sales by 2030, EVs currently account for only about 7% of new vehicle sales,” it said.
“While falling battery costs and a broader selection of electric models will stimulate sales, obstacles such as limited charging infrastructure and reduced government subsidies will weigh on adoption,” it pointed out.
Global sales growth
Moody’s Ratings has slightly increased global light vehicle sales growth expectation for this year to 2.1%.
The revision, up from 1.3%, is prompted by growth of more than 3% in the first nine months of 2025 that beat prior forecast.
“Still, we are sticking to our expectation of just 1.7% growth for 2026 and expect fourth quarter numbers to be soft, driven by expiring sales incentives in several regions and increasing tariff burdens,” the rating agency said.
“Our forecast remains slightly below our global GDP growth expectation of 2.6% for 2025 and 2.5% for 2026. This accounts for our expectation of increasing supply chain risks, such as for semiconductors and rare earths, which could diminish production and sales. With overall growth remaining muted, and continued pressure on profit margins, our sector outlook remains negative,” it added.
As for China, Moody’s said that in the country, the overall auto unit sales rose 12.4% year-on-year, with domestic sales rising by 11.7% and export sales climbing by 15.7%.
New energy vehicle sales
Overall, new energy vehicle (NEV) sales — which include BEVs, plug-in hybrid electric vehicles (PHEVs), and fuel cell electric vehicles (FCEVs) — continued to outpace overall auto sales, with volume jumping 32.7% during the same period.
“Still, we expect sales growth to soften for the rest of the year, reflecting a tough comparison with Q4 2024, which was boosted by an auto trade-in subsidy. We forecast domestic sales growth to reach 5% this year and 2% in 2026, while export sales growth will continue to outperform at 8% this year and 4% next year,” the rating agency said.
“These projections reflect our macroeconomic outlook, which forecasts Chinese GDP growth of 5.0% in 2025 and 4.5% in 2026, the possibility of a moderation in government stimulus measures in 2026 and the effects of continued global trade tensions on exports,” it added.
Published – November 19, 2025 10:53 am IST
