New Delhi: India's automobile sales are likely to get near-term support from inventory build-up ahead of the festive season, but growth rates may ease thereafter as the industry moves against a high base, JM Financial Institutional Securities said in a sector report.

"We expect inventory build-up ahead of the festive season to support wholesale volumes in the near term, following which, growth rates are expected to normalise over a high base," the brokerage said in its automobile sector update.

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The report said demand momentum remained healthy across major automobile segments, although the pace of growth differed sharply between passenger vehicles and two-wheelers.

Domestic passenger vehicle volumes rose 37 per cent year-on-year in August 2026, while volumes in the first five months of FY27 were up 30 per cent. Utility vehicles remained the main growth engine, with August volumes rising 46 per cent and their share in total passenger vehicle sales increasing to about 69 per cent from around 65 per cent a year earlier.

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JM Financial said stronger demand for utility vehicles continued to favour manufacturers with larger SUV portfolios.

"The continued outperformance of UVs should remain a key driver of PV industry growth, with players possessing a stronger SUV portfolio likely to remain the primary beneficiaries," it said.

Two-wheeler demand, meanwhile, remained resilient but moderated in August. Domestic ICE two-wheeler sales grew 5 per cent year-on-year during the month, taking FY27 year-to-date growth to 14 per cent.

The brokerage attributed the August slowdown partly to a later start to the festive season compared with last year.

Within motorcycles, demand remained stronger in premium categories. Sales in the 150-250cc segment were up 28 per cent year-on-year in FY27 so far, while volumes in the above-250cc category rose 34 per cent. In comparison, the sub-125cc segment recorded growth of about 6 per cent.

The report also flagged cost pressures as a key risk to the near-term outlook.

"Sustained inflationary pressures amid the ongoing West Asia conflict remain a key variable to monitor," JM Financial said.

The brokerage added that rising input costs remain an important monitorable even as demand across automobile segments stays healthy.