India's passenger vehicle (PV) industry is expected to grow steadily over the next three years, according to a report by Nomura.

The report forecasted a growth rate of 1.5% in FY25, followed by 5% in FY26 and 6 % in FY27. However, the mass segment may continue to face challenges due to affordability issues.

It said "the PV industry will grow +1.5%/+5%/+6% in FY25-F27F, while the CV industry is expected to witness 0%/+5%/+5% growth over the same period".

The report also highlighted that recently the Society of Indian Automobile Manufacturers (SIAM) pointed out that one of the key reasons for slow growth in the PV segment is affordability.

It stated that the rising costs due to currency depreciation could make vehicles more expensive for consumers.

Additionally, while the government has made some income tax cuts, the impact on lower-income buyers is expected to be limited. This means that demand for entry-level cars may remain weak.

However, demand for premium cars and SUVs is expected to stay strong. The report said "the key players think the premium/SUV segment will continue to do well, while the mass segment may remain subdued".

The commercial vehicle (CV) sector, which includes trucks and buses, is projected to remain flat in FY25, but may grow 5% each in FY26 and FY27. This sector is closely linked to economic activity and infrastructure development, which will play a crucial role in its growth.

In contrast, the two-wheeler (2W) segment is expected to perform much better. The report predicts 10% growth in FY25, followed by 7% in FY26 and 6.5% in FY27. The three-wheeler (3W) industry, which includes auto-rickshaws, is also likely to grow 10 % in FY25, with 5% growth in both FY26 and FY27.

The report estimates suggest that the PV industry will grow 5% year-on-year in FY26, but automakers themselves expect a lower growth of 1.0-1.5% . This indicates that the industry remains cautious about future demand.

Overall, India's auto industry is set for moderate growth, with the two-wheeler and premium car segments expected to perform better than the mass-market car segment.