Price hikes, fewer offers put no dent as more new cars hit road

Mumbai: India’s passenger vehicle market has quietly reset its growth narrative in FY26. While the industry sold a record 4.7 million cars last fiscal, the defining story is not how much India bought, but what it paid – and how little growth depended on discounts.

Long associated with aggressive festive schemes and dealer incentives, the market shifted to a premiumisation-led expansion cycle last year.

Carmakers expanded volumes while raising prices and trimming discounts, signalling stronger pricing power and reduced dependence on promotions.

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“This combination is typically seen only when underlying demand is strong enough that manufacturers do not need to rely on discounts,” said Ravi Bhatia, president at Jato Dynamics, an automotive data and analysis firm.

According to Jato Dynamics, prices of mass market passenger vehicles increased by an average 4.3% year-on-year in FY26 even as average incentives declined 4.6%. In the luxury segment, prices climbed 8.9% while incentives were cut by 18%.

A decisive consumer shift toward higher-value vehicles enabled manufacturers to raise average selling prices and improve their margins, industry experts noted.

Shift in Buyer Behaviour

They attributed the trend to rising purchasing power, strong product pipelines and easier credit access with longer tenure.

A structural shift in body styles reinforced the trend as SUVs accounted for almost 56% of total passenger vehicle sales in FY26, up from 54% in FY25, as sedans and MPVs continued to lose share. Hatchbacks held on to their share, helped by the GST cut on smaller vehicles to 18% from 28% earlier in September 2025. “Because SUVs carry higher price points and richer feature content, this mix shift alone lifted industry transaction values even before price increases,” a senior official at a Delhi-based car company said. Dealers highlighted a shift in buyer behaviour, where purchase decisions are increasingly variant-led rather than discount-led.

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“Customers are not negotiating the way they used to,” a large multi-brand dealer in North India said. “Most buyers walked in with a clear model and variant in mind, and many upgraded once financing options improved.”

Banks and NBFCs said customers are stretching budgets to upgrade to higher trims. The shift is less about affordability stress and more about structured upgrading through EMIs, a senior executive at a Mumbai-based lender said.

Most lenders and car companies declined on-record comments due to internal quiet periods ahead of financial result announcements.

On the macro side, a reduction in GST rates lowered ownership costs while personal income tax relief improved disposable income for middle-class households—the backbone of India’s passenger vehicle demand.

With policy tailwinds normalising and macro conditions still evolving, the key question is whether carmakers can sustain this pricing power-led growth into FY27, or be forced to revert to discounts, industry experts said.