M&M may surpass Tata Motors, Maruti Suzuki in PV segment in June: Nuvama

M&M in focus: Mahindra and Mahindra (M&M) is anticipated to surpass Tata Motors and Maruti Suzuki in the passenger vehicle (PV) segment in June 2024, driven by a low base, according to Nuvama Institutional Equities’ (Nuvama) recent note on the auto sector.

Raghunandhan NL, director at Nuvama, predicts a 13 per cent overall volume growth for M&M's automotive sector (including PVs, commercial vehicles, and three-wheelers), reaching 70,500 units. Meanwhile, Maruti Suzuki is expected to see a 2 per cent increase to 163,000 units, and Tata Motors' PV division is projected to remain flat at 47,400 units. 

That apart, the PV industry is expected to show positive growth of 3 per cent year-on-year in the domestic market, led by rising demand in utility vehicles (UVs) and dealer inventory buildup, according to Raghunandan. He further pointed out that vehicle discounts on average are higher than last year.

Nuvama also anticipates growth in two-wheelers and PVs, stable performance in commercial vehicles, and a slight downturn in the tractor segment due to a high base and weak agricultural sentiment in southern states.

Over the period spanning FY24 to FY26, Nuvama expects high single-digit growth in two-wheelers and tractors, contrasting with low-single-digit growth in PVs. 

Among OEMs, Bajaj Auto and Mahindra & Mahindra are highlighted as the top picks by Nuvama.

Meanwhile, here’s what to expect from other segments:

Two-Wheelers (2W)

2W industry volumes, Nuvama said, are expected to show positive growth of 5 per cent year-on-year in the domestic market, despite some purchase deferrals due to extreme heat conditions and a high base stemming from strong demand during last year's marriage season. Wholesale volumes, meanwhile, are projected to exceed retail sales due to dealer inventory build-up.

Furthermore, TVS Motor Company is anticipated to grow 9 per cent to 345,000 units, while Bajaj Auto's volumes are expected to remain flat at 340,000 units. Conversely, Hero MotoCorp and Eicher Motors Royal Enfield are likely to experience declines of 3 per cent and 9 per cent respectively, with expected volumes of 425,000 units and 70,000 units.

Commercial Vehicles (CV)

Despite a slowdown in the awarding of road construction projects, Raghunandan believes, industry volumes in the CV segment are expected to remain flat year-on-year. Higher e-way bill generation compared to last year suggests improved freight availability for transporters. 

Thus, analysts estimate varying volume growth rates: Eicher Motors VE Commercial Vehicles, Ashok Leyland, and Tata Motors Trucks and Buses divisions are expected to grow by 4 per cent, 3 per cent, and 1 per cent respectively, with volumes reaching 7,000 units, 15,700 units, and 34,600 units. Meanwhile, Mahindra & Mahindra's CV segment is projected to decline 1 per cent to 20,800 units.

Tractors

According to the domestic brokerage, the tractor industry is expected to see a marginal decline of 1 per cent year-on-year in the domestic market, attributed to a high base and subdued customer sentiment in southern states. Favourable terms of trade in recent months, with output inflation outpacing input inflation, provide some positive indicators. 

Mahindra & Mahindra's farm equipment division and Escorts, meanwhile, are forecasted to experience declines of 1 per cent and 4 per cent respectively, with expected volumes of 44,200 units and 9,500 units.