Elara turns cautious on autos as macro headwinds weigh on global demand

Brokerage firm Elara Capital has turned cautious on the automobiles and auto ancillaries space, citing macro headwinds that could weigh on global demand.  

Among sector players, the brokerage has reiterated its Sell rating on Samvardhana Motherson International, noting that slowing global passenger vehicle (PV) growth, a shrinking profit pool for global OEMs in China, and market-share pressures on legacy OEMs in Europe are key concerns for the company, which it believes has limited organic growth potential. 

On Tata Motors’ passenger vehicles business, Elara has retained its Reduce rating, stating that China remains a structural concern for Jaguar Land Rover (as is the case for other legacy OEMs), along with the company’s higher exposure to the MENA region (around 7–8 per cent). 

 

However, the brokerage noted that the commercial vehicle (CV) space has begun to see upgrades recently, particularly from Volvo Group, which implies that demand may be bottoming out and a recovery could be underway—likely positive for Tata Motors, and Bharat Forge. 

(Source: Elara Capital)

 

According to the brokerage, some US OEMs have also started focusing on internal combustion engine (ICE) and hybrid models following the removal of the federal credit on battery electric vehicles (BEVs). This, Elara believes, could support medium-term growth for the ICE and hybrid product segment, including starter motors, for Sona BLW Precision Forgings, compared with the structural decline expected earlier. “However, growth pressures for Tesla remain an overhang for SONACOMS,” said Elara.

Global PV production to decline 0.2% in CY26

In its global auto volume tracker, Elara analysed global sales data and conference call commentary of major original equipment manufacturers (OEMs) that have reported results so far. 

According to the report, global PV sales grew around 4.5 per cent year-on-year in CY25, with China, the US, and Europe posting growth of 9.1 per cent, 1.9 per cent, and 0.5 per cent respectively. However, the start to CY26 has been muted, with provisional global growth at –1.2 per cent in January 2026. China, the US, and Europe recorded declines of 6.8 per cent, 0.8 per cent, and 3.9 per cent respectively during the month. 

Elara attributed the decline in China to subsidy roll-offs, which led to pre-buying in the December quarter of CY25. As a result, the share of new energy vehicles (NEVs) fell sharply to 40.3 per cent in January from 52.3 per cent in December 2025. In the US, sales were affected by rising vehicle prices and affordability concerns, along with the expiry of the $7,500 federal EV tax credit.  READ | HDFC Sec initiates coverage on 8 defence stocks; HAL, BEL among top picks 

Among other highlights, the brokerage said OEMs continue to expect muted demand in CY26, with guidance pointing to flat to marginal growth in the US and Europe and a challenging environment in China. For instance, Mercedes-Benz Group has guided for global sales growth in the range of –2 per cent to +2 per cent. 

Elara also believes tariffs could remain a headwind through CY26. Other challenges include higher raw material costs, supply chain disruptions, and a fresh wave of memory chip shortages, along with intensifying EV-related write-offs. 

On the positive side, the CV demand outlook from Volvo Group, Elara said, has been upgraded, with the company now expecting growth of 2.9 per cent in Europe and 2.7 per cent in the US in CY26. 

“Global PV production is expected to decline by 0.2 per cent in CY26, as per S&P Mobility’s February 2026 forecast. While the MENA region contributes only 3–4 per cent of global demand, indirect impacts in the form of higher crude and energy prices, elevated freight rates, and supply chain disruptions remain key monitorables,” said the brokerage.

EV sales growth in CY25

According to report, China continued to lead BEV sales growth in CY25 with a 34 per cent year-on-year increase, followed by Europe at 31 per cent. BEV penetration stood at about 32 per cent in China, 18 per cent in Europe, and 8 per cent in the US during CY25. 

The US BEV market saw a sharp contraction of around 30–40 per cent after the removal of the federal tax credit from October 2025. China also saw BEV penetration fall sharply to 26.8 per cent in January following subsidy roll-offs in December 2025, said Elara.  

In Europe, Germany reintroduced a new EV subsidy programme from January, applicable to BEVs, PHEVs, and EREVs, with an allocation of EUR 3 billion to support around 800,000 new EVs. In CY25, the share of Chinese brands in the EU market rose to about 6 per cent from 3 per cent in CY24, while sales of ex-China brands in Europe declined 1 per cent year-on-year.

Focus on multi-energy powertrains gains traction

Elara highlighted that global OEMs have taken significant write-offs related to EV programmes and are reassessing their BEV strategies. Stellantis has taken a one-time adjustment of EUR 25.4 billion, including platform impairment charges of around EUR 6.6 billion, programme cancellations worth EUR 9 billion, and warranty reassessment of about €4.1 billion. 

Similarly, Ford Motor Company plans to take charges of $7 billion during CY26–27 as it shifts towards multi-energy platforms, including the disposition of BOSK, its joint venture with SK On, the battery arm of SK Group. Meanwhile, General Motors took charges of $7.6 billion in the second half of CY25 for rightsising capacity and discounting its EV van subsidiary BrightDrop. 

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