While global automakers face pressure from tariffs, geopolitical tensions and weak affordability, India continues to benefit from improving vehicle affordability, tax reforms, interest rate cuts and infrastructure-driven economic activity.
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India is emerging as one of the world’s fastest-growing automobile markets even as demand slows in the US and China, with Moody’s saying the country continues to benefit from improving affordability, policy support and infrastructure-led economic activity despite rising global risks.India is increasingly becoming the global auto industry’s growth engine as slowing demand in the US and China, combined with tariff uncertainty and geopolitical tensions, drag worldwide vehicle sales growth to near-stagnation levels, according to Moody’s latest global automotive outlook.“Our outlook for the global automotive industry remains negative,” Moody’s said, citing tariffs, trade disputes and the unresolved Middle East conflict as key pressures weighing on growth and profitability.Against that backdrop, the ratings agency expects India’s light vehicle sales to grow 7.5% in 2026 and another 5% in 2027, sharply outperforming projected global growth of just 0.3% and 0.5%, respectively.By comparison, Moody’s expects US light vehicle sales to decline 1.5% this year, while China’s domestic auto sales are projected to fall 4.6%.India vs the worldThe report points to a widening divergence in the global automotive industry, where mature markets are increasingly grappling with affordability pressures, EV transition costs, and slowing replacement demand, while India continues to benefit from structural growth drivers.“We expect light vehicle sales in India to increase 7% this year and 5% in 2027,” Moody’s said. “Sales rose about 20% year-on-year through the first four months of 2026, as tax rationalization, interest rate cuts and income tax relief materially improved vehicle affordability and financing conditions.”Globally, however, conditions remain weak.“We expect global light vehicle sales to rise only moderately to around 92.3 million vehicles this year,” Moody’s said, forecasting global growth of just 0.3% in 2026 and 0.5% in 2027. The agency also lowered its broader global growth assumptions. “We recently reduced our global G-20 GDP growth forecast to around 2.4% this year and 2.6% in 2027,” it said.China, US under pressureChina, long the world’s largest growth engine for automakers, is now seeing a split between exports and domestic demand.“Domestic sales are likely to decline 4.6% this year and 2.7% in 2027, reflecting less government stimulus and the fact that many customers bought in prior years to receive stimulus,” Moody’s said. In the US, weakening affordability is emerging as a major concern. “We forecast US light vehicle sales of 16.1 million units this year, down 1.5% from 2025,” Moody’s said, adding that “elevated energy and food prices are also eroding household purchasing power.”The report added that the US market is becoming increasingly dependent on higher-income households purchasing premium trucks and SUVs.Europe, meanwhile, continues to struggle with EV transition costs and profitability pressures.“European automakers’ margins will remain the weakest,” Moody’s said, citing tariffs, rising EV investments and intensifying competition from Chinese players.India’s risks are rising tooDespite India’s relative resilience, Moody’s cautioned that the country is beginning to face the same structural pressures that are weighing on global auto markets.“The ongoing Middle East conflict, which increased energy prices, weakened consumer confidence, and limited the possibility of more interest rate cuts, will further stifle vehicle sales,” Moody’s said. The agency also warned that India’s EV transition remains slow.“Elevated fuel prices may encourage a transition to EVs, they currently represent only about 6% of passenger vehicle sales — significantly less than the government’s target of 30% by 2030,” the report noted.Trucks remain a global outlier for IndiaThe report also identified India as one of the strongest-performing commercial vehicle markets globally. “India continues to benefit from infrastructure investment and strong freight demand,” Moody’s said while forecasting India’s truck market to grow 7% in 2026 and 4% in 2027.Globally, truck demand is projected to rise a more modest 2.7% this year.The divergence reflects a broader shift underway in the global automotive industry, where developed markets are increasingly becoming replacement-driven while India remains one of the few major expansion-led automotive economies.Published on June 3, 2026
