Motilal Oswal favours Maruti, M&M, TVS Motor as auto sector momentum holds

Entry-level vehicles across 2Ws and PVs are seeing a notable pickup in demand, while discounts are expected to gradually reduce, reflecting normalisation in market dynamics.

Following the GST rationalisation, demand momentum in the Indian automobile sector has remained robust even after the festive season, signaling a healthy underlying consumption trend, analysts said. Entry-level vehicles across two-wheelers (2Ws) and passenger vehicles (PVs) are seeing a notable pickup in demand, while discounts are expected to gradually reduce, reflecting normalisation in market dynamics. 

 

Against this backdrop, domestic brokerage Motilal Oswal recommends Maruti Suzuki, Mahindra & Mahindra (M&M), and TVS Motor Company as top original equipment manufacturer (OEM) picks, with Endurance, SAMIL, and Happy Forgings favoured among auto ancillary stocks.

 

Passenger vehicles: UV-led recovery

 

The passenger vehicle segment witnessed a 18.7 per cent year-on-year (Y-o-Y) growth in November 2025, driven by all categories including cars and utility vehicles (UVs). While the year-to-date (Y-T-D) growth remains moderate at 3.6 per cent, certain players have considerably outperformed peers. Mahindra & Mahindra grew 18 per cent Y-o-Y, driven by the Thar (+59 per cent Y-o-Y) and new electric vehicle launches, which sold ~31,000 units Y-T-D. Toyota delivered 16 per cent growth, boosted by Innova Hycross, which now outsells Crysta at a 64:36 mix, while Kia rose 9 per cent, aided primarily by Carens (~7,100 units/month Y-T-D). Conversely, Maruti and Hyundai volumes remained largely flat or declined, reflecting a more muted performance in select segments.

 

Within cars, November volumes grew 17 per cent Y-o-Y, though Y-T-D volumes were slightly down (~1 per cent). Models like Dzire, with a 46 per cent Y-o-Y increase, and Grand Vitara, which rebounded to ~11,000 units in November, have been key growth drivers for MSIL. On the flip side, models such as Alto, Spresso, and Honda City faced sharp declines on a Y-T-D basis. In UVs, M&M, Kia, and Toyota have captured market share, while MSIL and Hyundai lagged, highlighting the continuing shift in consumer preference toward UVs and premium offerings.

 

Two-wheelers: TVS outperforms amid segmental shifts

 

The domestic 2W internal combustion engine (ICE) market displayed strong growth of 19.1 per cent Y-o-Y in November 2025, aided by festive order backlogs and normalisation of dealer inventories. However, Y-T-D growth is modest at 2.2 per cent, impacted by weak demand in the first quarter. Among the top four 2W players, TVS Motor was the only company to gain market share (+190 basis points Y-T-D to 18.8 per cent), while Hero MotoCorp (HMCL) and Honda Motorcycle & Scooter India (HMSI) lost share.

 

Motorcycle volumes were largely flat Y-T-D, with segments >250cc (+23 per cent) and 150-250cc (+4 per cent) showing growth. Royal Enfield led the >250cc segment with strong Bullet 350 demand (+59 per cent Y-o-Y), translating to an 87.3 per cent market share. In the 150–250cc category, TVS emerged as the standout performer with 31.4 per cent Y-o-Y growth Y-T-D, driven by the Apache and the newly launched Ronin, gaining 610 basis points of market share.

 

The 100cc and 125cc segments highlighted contrasting trends. The 100cc segment declined ~3 per cent Y-T-D, but HMCL strengthened its dominance with an 80.6 per cent share, led by HF Deluxe. Meanwhile, HMSI capitalised on the Shine and CB 125 Hornet in the 125cc segment, gaining 560 basis points to 48.9 per cent Y-T-D, while BJAUT and HMCL ceded share. Scooters also showed robust demand, growing 7.8 per cent Y-T-D, with TVS Jupiter 110 and Ntorq 150 contributing to a significant 355-basis point gain in market share. HMCL also performed well with Destiny 125 (+76 per cent Y-o-Y), while HMSI’s Activa and Dio models saw declining volumes, resulting in a 420-basis point loss in share.

 

Valuation and outlook

 

According to Motilal Oswal analysts, sustained demand post-festive season, particularly for entry-level vehicles, is a key positive for the sector. As inventories normalise and demand recovers, discounts are expected to ease, improving margins for OEMs and dealers alike. 

 

Maruti Suzuki stands out as a top pick due to its new launches and export momentum, while M&M benefits from a strong UV portfolio and robust tractor sales. In the 2W space, TVS Motor’s consistent market share gains and segmental outperformance make it a preferred pick. Among auto ancillary companies, Endurance, SAMIL, and Happy Forgings are expected to benefit from recovery in OEM demand.

 

Hence, the Indian automobile sector appears well-positioned for steady growth into 2026, supported by resilient consumer demand, successful product launches, and an ongoing shift toward higher-value segments. Monitoring demand sustainability from January 2026 onward will be crucial to gauge the durability of this post-festive recovery.

 

Disclaimer: The sector/stock outlook has been suggested by Motilal Oswal. Views expressed are their own.