January 2026 auto retail: Two-wheelers drive growth as rural demand lifts passenger vehicles

FADA expects a continued broad-based growth in vehicle retail going forward.

• India's vehicle retail grew 17.61% y-o-y in January 2026 to 27,22,558 units.
• Two-wheeler segment saw impressive growth at 20.82% y-o-y, led by rural demand.
• FADA expects positive industry sentiment and growth in coming months.

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India's vehicle retail market recorded a strong start to calendar year (CY) 2026, growing nearly 18% year-on-year (y-o-y), led by momentum in passenger vehicle (PV) and two-wheeler segments, according to January sales data released by the industry body Federation of Automobile Dealers Associations (FADA).

Overall vehicle retail increased 17.61% y-o-y to 27,22,558 units. FADA attributed the performance to post-GST momentum, healthy rural cash flows from harvest, weddings and sustained demand across mobility and freight segments.

Passenger vehicles: Rural markets shine

The PV retail rose 7.22% y-o-y to 5,13,475 units in January. Urban markets accounted for around 59.2% of PV volumes, while rural markets contributed about 40.8%, FADA said. However, rural PV retail grew 14.43% y-o-y, compared with urban growth of 2.75%.

FADA attributed the PV growth to preference for SUVs and compact SUVs, revival of entry-level cars, improved product availability and continued schemes. Wedding-season demand was also cited as a supporting factor. The association further noted that PV inventory levels softened to around 32-34 days during the month, which it said reflects improved channel discipline and working-capital efficiency.

Two-wheelers: Growth anchored in rural India, with urban recovery

Two-wheeler retail increased 20.82% y-o-y to 18,52,870 units in January, making it the fastest-growing major segment. Rural markets accounted for around 56% of two-wheeler volumes, while urban markets contributed about 44%, according to FADA.

Rural two-wheeler retail grew 19.77% y-o-y, supported by Pongal and Makar Sankranti demand, marriage-season footfalls and better affordability. Urban markets recorded 22.19 % y-o-y growth. FADA said this reflects demand normalisation beyond festive-only buying. Dealer feedback cited strong enquiry momentum, sharper customer engagement, quicker digital follow-ups, and a shift towards higher-value and mid-powered motorcycles. At the same time, the industry body flagged selective model-wise supply constraints and aggressive competitive discounting as factors influencing retail activity in certain pockets.

Other segments: Additional retail performance indicators

Commercial vehicle (CV) retail rose 15.07% y-o-y to 1,07,486 units. FADA attributed this to improving freight sentiment and replacement-led buying, supported by goods movement, infrastructure activity, and confidence among single-owner operators. Growth was seen across light and heavy commercial vehicles.

Three-wheeler retail increased 18.80% y-o-y to 1,27,134 units, while tractor sales rose 22.89% y-o-y to 1,14,759 units, supported by rural demand. However, construction equipment retail declined 21.09% y-o-y, which FADA attributed to a high base effect and segment-specific recalibration.

Outlook for the industry

FADA said near-term sentiment remains positive. For February 2026, 72.56% of dealers expect growth, 22.93% expect flat performance, and 4.51% expect de-growth. Over the next three months, 79.70% of dealers expect growth, while 1.88% expect de-growth. FADA attributed the outlook to a growth-oriented Union Budget with an infrastructure and agriculture focus, continued wedding and festival demand, and rate stability improving affordability and financing comfort.