Festive Demand To Lift India’s Car Market, But Global Risks Linger

By Shubhangi Bhatia

What?

India's auto industry is heading into the festive season with strong optimism, starting with Ganesh Chaturthi, followed by Navratri, Durga Puja, Dussehra in October, and Dhanteras and Diwali in November.

This window typically drives 30-40% of annual passenger vehicle sales, and this year the setup looks favourable as the repo rate cuts have lowered auto loan EMIs, dealer stock is at 38-40 days, and automakers are better prepared on availability than last year.

"This should be a bumper festive season," Sai Giridhar, President of the Federation of Automobile Dealers Associations, told The Core, adding, "This time around, OEMs are more prepared. The availability would be there."

However, experts caution it isn't a like-to-like year-on-year comparison of the festive period, since last year's high base concentrated narrowly in September-October, skews the numbers.

"The true test of the season lies in showroom conversion through September to November, not in year-on-year optics," Giridhar said.

Why?

Last year's festive season was distorted by GST rate cuts announced on August 15 and implemented on September 22, when Navratri had begun, causing buyers to defer purchases until then.

This year, with stronger demand momentum and dealer readiness, sales are expected to convert more smoothly.

Puneet Gupta of Mobility Global told The Core, "India's passenger vehicle market is on track to post around 14% growth in calendar year 2026. However, he added that growth is likely to moderate in the coming months as the market begins to lap the strong base created last year following the GST rate cuts.

For full year, the passenger vehicle segment is on track to cross 5 million units, after clocking 4.47 million units in 2025.

Industry expert Arun Malhotra called auto the "star performer" among sectors benefiting from the GST cuts, noting that domestic conditions this festive season are almost entirely favourable. "The only real risk, if any, will come from external factors,” he said.

Why It Matters

Geopolitical risk is the biggest swing factor. Brent crude breached $100 a barrel last week, amid the West Asia conflict, which has already pushed input costs for the automakers. Maruti, Hyundai, Tata, Mahindra, Kia have announced repeated price hikes. If fuel costs are passed on to consumers, it could dent big-ticket spending.

"Rising fuel costs could add to inflationary pressures, making consumers more cautious about big-ticket purchases and encouraging some buyers to trade down to more affordable vehicles," Gupta said.

Meanwhile, the fuel mix is shifting structurally as alternative fuels (CNG, hybrid, EV) have overtaken petrol for the first time, at 42% versus 41%. This trend is set to accelerate as stricter emission norms come in effect from April 2027.

And in a twist few saw coming, E20 ethanol-blend worries are pushing some bigger SUV buyers toward an unlikely favourite of diesel!

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9.92%

That’s how much India’s wholesale inflation rose in August compared with a year ago, according to data from the Ministry of Commerce and Industry.

That’s up from 9.78% in July.

Year-on-year inflation rate for fuel and power was the highest at 22.93%. Wholesale food inflation also rose to 7.05%.

Pivot: But price pressures were more moderate at the retail level.

India’s retail inflation rose to 4.82% in August from 4.45% in July, according to provisional data from the Ministry of Statistics and Programme Implementation (MoSPI).

Retail inflation is measured by the Consumer Price Index, or CPI, which tracks changes in the prices of a basket of goods and services consumed by households.

Breakdown: Food prices were a major driver here too. Food inflation climbed to 5.95% from 5.52% in July.

Rajani Sinha, Chief Economist at CareEdge Ratings, said the inflation outlook remains vulnerable to “both external and weather-related risks,” including uncertainty around the Strait of Hormuz and below-normal rainfall in India.

Sinha expects CPI inflation to peak in the third quarter of FY27 and average around 5% for the year.

So, while retail inflation remains relatively moderate, food, fuel and weather-related risks could keep price pressures elevated.

Saudi Oil Under Fire

Tensions in West Asia grew worse on Monday as Gulf Arab countries cancelled a planned meeting with Iran, while Yemen's Houthi fighters launched an attack on a Saudi military airbase, firing missiles and drones. The Houthis said it was payback for recent Saudi strikes on Yemen, Reuters reported.

This came after the Houthis seized a Red Sea island last week and a separate attack, blamed on Iran-backed fighters in Iraq, damaged a key Saudi oil pipeline.

Overview: The pipeline closure has left Asian oil buyers waiting for updates on shipments from the Saudi port of Yanbu. Several oil tankers appear stuck outside the port, according to a Bloomberg report.

Critical Moment: Oil prices jumped nearly 4% on Monday, reaching their highest level since May. In the US, diesel prices hit a record high of over $6.23 a gallon, as the conflict continues to disrupt global oil supplies.

India Extends Power to Nepal

India has approved exporting 654 Megawatts to Nepal for 18 hours a day until December 31, after devastating floods last month wiped out about a tenth of the Himalayan nation's generation capacity, India's power ministry said on Monday, as reported by Reuters.

Context: The floods, triggered by a glacier collapse, have killed nearly 1,400 people in Nepal and Tibet and swept away more than 12 hydropower plants.

About 900 power station workers are among more than 5,300 people still missing.

Hydropower supplies almost all of Nepal's electricity and had become a fast-growing source of export revenue.

After the floods ravaged Bagmati province, its main hydropower-producing region, Nepal halted power exports and said it would buy electricity from India to cover domestic shortages.

Critical Moment: India said the approval would help Nepal meet its power needs "during this difficult period" and strengthen energy cooperation between the two neighbours.

The quantum of power to be exported from January will be reviewed in December.

Nepal has also said it will seek financial help from wealthier countries and global agencies, arguing they should contribute to the $5 billion needed for initial rebuilding, Reuters reported.

EU Raises India Steel Quota

India will now be able to export up to 1.64 million metric tons of steel to the European Union (EU) each year, without extra tariffs, under a trade agreement. However, Indian exporters will still have to pay carbon-related costs.

The deal gives India an extra quota of nearly 695,000 tons, added to its existing quota of about 947,000 tons under WTO rules. Together, this covers about 68% of India's 2025 steel exports to the EU, up from 39% before.

Catch Up Quick: Any steel sent beyond this quota will face a steep 50% EU tariff. Also, even steel within the quota is not free from the EU's carbon tax rule, which could add around 35% to costs once fully in effect.

Setup: Most of the quota covers flat steel products, with hot-rolled sheets getting the largest share. The new rules will start once the trade deal officially takes effect, expected by the end of this year.

A Looming Water Crisis

The Himalayas are warming, their glaciers are shrinking faster than ever, and the region is running out of time to prepare for the crisis.

Fast Facts: A new report from Systemiq, the Integrated Mountain Initiative, the International Centre for Integrated Mountain Development (ICIMOD) and India’s G.B. Pant National Institute of Himalayan Environment warns that Himalayan glaciers are losing mass 65% faster than they were a decade ago. That is pushing the region towards “peak water” by mid-century. In simple terms, glaciers will eventually reach a point where they can no longer provide more meltwater as they shrink. River flows could then start declining, threatening water supplies for communities, farms and economies downstream.

Outcome: The risks are already visible. Recent floods in Nepal have underscored how vulnerable Himalayan communities are to extreme weather, while retreating glaciers are leaving behind unstable glacial lakes.

Nearly 200 glacial lakes in India are considered high-risk, including 56 classified as very high-risk. Yet only 21 of an estimated 40,000 glaciers across the Hindu Kush-Himalaya are currently monitored on the ground.

That matters far beyond the mountains. The Himalayas underpin more than 20% of India’s GDP and support hundreds of millions of people.

The report calls for better monitoring, early-warning systems and climate-resilient infrastructure. Because the warning signs aren’t some distant threat. They’re already here.

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