Auto share price, Auto expo 2025: Bharat Mobility Global Expo 2025, formerly known as Auto Expo, kick started in New Delhi on January 17, 2025. While the automobile industry is hoping to rev up auto demand by showcasing electric vehicles (EVs), innovative concept cars, and production-ready models, analysts are cautious on the sector, at least for the near-term.
According to them, the auto industry's "once-in-a century kind of transition towards greener energies" may lead to some consolidation and slowdown in demand, as industry players adjust their product portfolios with suitable pricing.
"EV penetration would get a significant boost when auto players address issues of range-anxiety, lifetime warranty for batteries, and reduce the cost of acquisition. For Hybrids, the initial cost of acquisition remains high due to the dual driving mechanism, whereas, for flexi-fuel cars, the existing internal combustion engine (ICE) technology does not support the government’s proposed 30-per cent blending," said a channel check report by B&K Securities.
Auto demand in slow lane
That apart, industry watchers believe the automobile vehicle demand has also been impacted by higher inflation and interest rates.
Total retail sales declined by 12 per cent in December, 2024, compared to the corresponding period last year. All categories except tractors witnessed degrowth, with sales of two wheelers falling 18 per cent, passenger vehicles (PV) 2 per cent, commercial vehicles (CV) 5.2 per cent, and three wheelers 4.5 per cent, data by the Federation of Automobile Dealers Associations (FADA) revealed.
Also Read
According to the Association, low cash flow amid delayed crop payments and halted government disbursements affected the rural demand to some extent, supply-side challenges for popular models, the growing push toward EVs,, and intense price competition weighed on volumes in the urban market.
The impact was seen on the bourses too. Over the past three months, till January 16, the Nifty Auto index dropped 11.76 per cent on the National Stock Exchange (NSE), ACE Equity data shows. By comparison, the benchmark Nifty50 index declined 6.6 per cent during the period.
Among individual stocks, only Eicher Motors share price gained on the NSE during this period, clocking a rise of 7.9 per cent. All other auto index stocks fell, led by Samvardhana Motherson (down 27.8 per cent), Bajaj Auto (26.13 per cent), Hero Moto (24.5 per cent), and Exide Industries (24.27 per cent). Other stocks slipped in the range of 2.3 per cent to 18.3 per cent.
Going ahead, analysts at Nomura think the consumption demand could remain slow across segments with lower-end segments like entry-level two-wheelers and small cars to be more impacted, while premium segments such as sports utility vehicles (SUVs), bikes with over 125cc engines, and EVs growing faster.
"We expect 5 per cent and 7 per cent industry volume growth in PVs and 2Ws, respectively, in FY26. Moreover, the growth could come at the cost of margins as capacity utilisation may drop in FY26," the brokerage said.
HDFC Securities, too, expects the domestic PV industry to grow at a compounded annual growth rate (CAGR) of 5-7 per cent over the medium-term, and the domestic two-wheeler industry at an 8-10 per cent CAGR.
As for the domestic commercial vehicle (CV) industry, the brokerage expects the upcycle to begin in the next financial year of 2025-26 (FY26), driven by continued higher economic growth and the government’s focus on increasing capex.
Auto Q3 earnings miss?
In the near-term, Nomura believes most automobile companies may report earnings miss in the December quarter of the current fiscal (Q3FY25).
"While our commodity cost index is largely flattish for PV/2Ws compared with Q2FY25, we see margin pressure from weaker mix and higher discounts in Q3FY25. Hence, earnings growth is likely to be impacted. Compared to Bloomberg consensus Q3 estimates, we believe Ashok Leyland can surprise positively, while Maruti Suzuki India, Bajaj Auto, Hyundai India, and Eicher Motors will likely miss," the global brokerage added.
Given this, Mahindra and Mahindra (M&M) remains Nomura’s top auto stock pick, followed by Hyundai Motor India. HDFC Securities, on the other hand, bets on Maruti Suzuki, Bharat Forge, Hero MotoCorp, and Ashok Leyland. All the stocks are ‘Buy’ rated.