Auto shares rally; Maruti Suzuki, TVS, Hero Moto, Bajaj, M&M hit new highs

In the past one month, the S&P BSE Auto index has rallied 10 per cent against a 1 per cent decline in the S&P BSE Sensex

Shares of automobiles companies were in demand Friday as the BSE Auto index rose over 2 per cent, hitting a new high.

Maruti Suzuki India (MSIL), TVS Motor Company, Bajaj Auto, Hero MotoCorp and Mahindra & Mahindra (M&M) also made fresh highs on the BSE, rallying 3-4 per cent. 

At 10:54 am; the auto index was the top gainer among sectoral indices. In the past one month, it has rallied 10 per cent against a 1 per cent decline in the benchmark BSE Sensex index.

Tata Motors, MSIL, Bajaj Auto, Hero MotoCorp and M&M were up 10-15 per cent during the last month, while TVS Motor Company and Eicher Motors gained 7 per cent and 4 per cent, respectively.

In the October-December quarter (Q3FY24), auto volumes (ex-tractors) grew 16 per cent year-on-year (YoY) (flat quarter-on-quarter (QoQ)) led by a healthy recovery in two-wheelers (2Ws), stable growth across other segments and a lower base due to the festive mismatch. 2Ws witnessed the sharpest growth of 19 per cent YoY during the quarter, as per Motilal Oswal Financial Services.

In terms of domestic sales, the passenger vehicle (PV) industry constitutes 18 per cent of the country’s total automobile industry.

The passenger vehicle (PV) industry domestic sales grew by 7.4 per cent YoY in 9MFY24. The segment’s growth trajectory continued for two consecutive fiscal years with improved vehicle availability and an influx of new & refreshed models from various OEMs.

This uplift was further supported by enhanced supplies and an increasing variety in the product portfolio, diversifying consumer demand.

"The PV industry is likely to record a volume growth of around 8 per cent-10 per cent in FY24 as the pent-up demand levels off amid hike in vehicle prices. This growth is anticipated to moderate in FY25 owing to tapering down of pent up demand while supported by healthy order book, improvement in the supply chain, new model launches and increasing demand in the Utility Vehicles (UVs) segment,” said Tanvi Shah, Director of CareEdge Research.

The demand for premium variants is expected to remain healthy, led by increasing demand for the luxury & premium models, while the demand for entry-level variants is expected to remain muted due to high interest rates and an inflationary environment, Shah said.

Electric four-wheeler (E4Ws) sales have grown significantly in the past few years.

The E4W segment contributes approximately around 6 per cent of the total EV market sales.

Major OEMs have planned to introduce more EV models in the future, suitable for the Indian market which could boost their adoption and increase competition in the market, Shah added.

The government's emphasis on infrastructure development, while ensuring fiscal prudence in its recent interim budget, has created a conducive business and economic environment, which would facilitate higher growth and job creation, as per Niranjan Gupta, Chief Executive Officer (CEO), Hero MotoCorp.

Announcement of higher horticulture production, government support and improved Rabi sowing will support demand recovery for tractors in coming months, analysts at Kotak Securities note.

Meanwhile, Ola Electric has become the first EV company that has filed its draft red herring prospectus (DRHP) with the Sebi for its initial public offering (IPO). This is the first issue by an automaker in the country in more than 20 years.