Motilal Oswal sector of the week: Autos; check top stock bets, levels here

India’s automobile sector maintained robust momentum in October, with wholesale volumes across passenger vehicles (PVs), commercial vehicles (CVs), two-wheelers (2Ws), and tractors largely meeting expectations. Healthy festive demand, improved consumer sentiment, and easing inventory levels have underpinned steady growth across most categories, signalling sustained recovery in domestic auto consumption.

 

Passenger vehicles continued to outperform, posting an 11 per cent year-on-year (Y-o-Y) rise in wholesales among leading players. The surge was fueled by strong demand for utility vehicles, compact cars, and vans. Several manufacturers recorded double-digit growth, supported by higher customer footfalls and improved booking activity through the festive period. Retail sales grew faster than wholesales, helping inventory levels fall below normal to about three weeks, indicating a healthy demand pipeline.

 

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The two-wheeler segment maintained its steady trajectory, with major manufacturers delivering growth in the low double digits. Motorcycle demand remained resilient, while scooter sales also showed an uptick, reflecting improving rural sentiment and gradual normalisation of entry-level demand. Three-wheelers, meanwhile, posted strong volume gains of over 70 per cent Y-o-Y, aided by improving urban mobility and logistics activity. 

Commercial vehicles recorded around 12 per cent Y-o-Y growth, with demand improving across medium and heavy vehicle categories. The momentum was supported by replacement demand, infrastructure spending, and healthy fleet utilisation levels. Although monthly sequential growth was softer, industry participants expect volume traction to sustain as freight activity remains buoyant.

 

Tractor volumes presented a mixed picture, moderating sequentially after record-high sales in September due to festive season shifts. Yet, leading players still posted positive year-on-year growth, reflecting resilient rural demand and higher farm activity.

Overall, the industry’s October performance underscores broad-based strength, aided by favourable macroeconomic conditions and festive tailwinds. Entry-level demand in both the 2W and PV segments is showing visible recovery, which could further support margin normalisation as discounting pressures ease post-festive season. With consumption sentiment turning positive and the supply chain environment remaining stable, the auto sector appears poised to sustain its growth momentum into the medium term.  CATCH STOCK MARKET LIVE UPDATES TODAY 

TVS Motor Company – TP: 4159

 

TVS Motor Company benefits from a strong product/momentum backdrop, with solid volumes and a healthy launch pipeline that bolster confidence in sustained performance. Its premiumisation strategy and diversified segments are paying off, with consistent market-share gains across domestic and export markets, and expansion into used-vehicle, three-wheeler, EV and export channels enhancing resilience. Margins are on a favourable trajectory, as Ebitda margins gradually improve alongside robust revenue growth. Structural tailwinds, including recent GST rate cuts, a buoyant festive season and a favourable product cycle, further support the outlook. Analysts have upgraded forecasts, citing higher earnings visibility and long-term growth prospects. With large projected CAGRs in revenue, Ebitda and PAT, the company’s premium valuation is supported by valuation discipline and the expectation of sustained outperformance.

 

Mahindra & Mahindra – TP: 4091

 

Mahindra & Mahindra delivered a robust FY25 performance, driven by leadership in SUVs, strong international growth, and effective cost management. SUV revenue market share expanded 210bps Y-o-Y to 22.5 per cent, consolidating its top position. In Oct’25, PV wholesales & tractor sales grew 31 per cent/12.5 per cent Y-o-Y ahead of expectations despite a high base. We expect the demand uptick to continue going forward, supported by positive consumer sentiment. MM has sufficient rare earth inventory for two quarters of FY26 and is exploring substitutes to elude supply issues. Backed by rural recovery and strong UV/tractor launches, we expect ~15 per cent/14 per cent/18 per cent CAGR in revenue/Ebitda/PAT over FY25–27.

 

(Disclaimer: This article is by Motilal Oswal Financial Services Research desk. Views expressed are their own.)