India's two-wheeler and commercial vehicle sectors poised to outperform passenger cars amid rising costs

India’s two-wheeler and commercial vehicle manufacturers are better equipped than passenger vehicle makers to navigate increasing commodity prices, with strong demand and flexible pricing strategies positioning these segments for potential outperformance in FY27, according to Emkay.

India’s two-wheeler and commercial vehicle makers are better placed than passenger vehicle manufacturers to weather rising commodity costs, according to Emkay, which said strong demand and greater pricing flexibility should help those segments outperform in FY27. The brokerage’s assessment comes even as the domestic auto market continues to expand at a healthy pace and retailers report sustained momentum across most categories.

Emkay said retail demand remained firm in two-wheelers, passenger vehicles and commercial vehicles, although headline growth has become harder to read because of a distorted comparison base. Diwali will fall in November 2026, rather than October 2025, while September 2025 was boosted by purchases deferred after the goods and services tax cut, creating a high benchmark for year-on-year comparisons. Even so, the report said underlying demand remains solid.

Two-wheeler sales were the standout, with retail volumes rising 33 per cent from a year earlier, ahead of 22 per cent growth in the second half of FY26, 29 per cent in July and 21 per cent in August 2026. Medium and heavy commercial vehicle retail sales were also strong, climbing 50 per cent year on year, compared with 30 per cent in July and 29 per cent in August. Passenger vehicle sales were broadly healthy too, with Maruti Suzuki India posting 30 per cent domestic sales growth, while tractor demand moved in the opposite direction, with Escorts and Mahindra & Mahindra both reporting declines.

The broader picture is one of an industry still benefiting from demand support, but facing a more mixed outlook into the next financial year. ICRA has separately projected that passenger vehicle growth will slow to 4 per cent to 6 per cent in FY27, after a stronger FY26 helped by festive demand, tax relief and new model launches. It expects utility vehicles to keep dominating the market, accounting for a large share of sales. For two-wheelers, ICRA has forecast more modest domestic volume growth of 3 per cent to 5 per cent in FY27, citing a high base, regulatory changes and the risk of a weaker monsoon.

Even so, Emkay’s view is that the relative earnings and pricing outlook still favours two-wheelers and commercial vehicles over passenger cars. The firm said the launch pipeline for new passenger vehicles looks limited in FY27, while commodity inflation is likely to squeeze margins across the industry. In that setting, it argued, manufacturers with more room to pass on costs should be in a stronger position than passenger vehicle makers.