The domestic automotive industry is expected to sustain its growth momentum in the second half of the current fiscal year, although sales growth may moderate due to a high base, said Shenu Agarwal, president of the Society of Indian Automobile Manufacturers (SIAM).

Automobile sales across categories increased by 20% year on year in the six months ended September 30th. Full-year growth is expected to be supported by improved affordability following the GST 2.0 reforms, strong financing support, resilient demand in rural and urban markets, and festive-season purchases, Agarwal told media sources in his first interview since assuming office in September.

"New launches, infrastructure spending, healthy freight movement and fleet replacement are also driving demand," said Agarwal, who is also the managing director of truck and bus manufacturer Ashok Leyland.

Alternative fuels and electric vehicles (EVs) contributed to a 31% increase in passenger vehicle sales during the July-September quarter. Agarwal said the EV ecosystem is maturing, supported by a wider range of offerings, an expanding charging network and supportive government policies.

"Alternative fuel technologies are also gaining wider acceptance," he said. "We expect demand for cleaner and more efficient vehicles to continue increasing in the medium term. These technologies will play an important role in India's sustainable mobility transition." The recently notified Corporate Average Fuel Efficiency (CAFE) III norms are also expected to attract further investment in new and sustainable technologies, he added.

Agarwal identified inflationary pressures, higher interest rates and rising input costs as continuing risks to demand. However, he said the industry remained "cautiously optimistic" and expected growth to remain positive.

Exports remained largely strong in the previous quarter despite geopolitical uncertainties, Agarwal said. Two-wheeler exports increased by 28% to 1.65 million units in Q2 FY27, marking the highest-ever figure for a second quarter. Three-wheeler exports grew by 30%, while commercial vehicle exports increased by 72.5%.

Agarwal said passenger vehicle exports declined by 5.2% in the September quarter, owing to a high base and logistics constraints arising from the West Asia crisis. "In the medium term, we will continue to monitor geopolitical developments closely," he said. "The broad-based growth across most segments demonstrates the strength and resilience of Indian automotive products in overseas markets."

Meanwhile, the entry-level car segment is also witnessing a recovery following the reduction in goods and services tax (GST) rates in September 2025, which prompted manufacturers to lower vehicle prices. This indicates a revival in demand among first-time buyers.

Agarwal said the underlying demand fundamentals remained supportive, adding that the industry expected the growth momentum to continue.

In H1 FY27, sales of entry-level passenger cars measuring up to 3.6 metres in length increased by 86%. Among mass-market two-wheelers, sales of entry-level scooters with engines of up to 125cc grew by 17.5%, while moped sales in the 75-100cc segment increased by 22%. Sales of 110cc motorcycles rose by 5.1%.

Agarwal said vehicle penetration in India remained relatively low, indicating significant potential for further expansion in the domestic automotive market.