Auto stocks: Nomura sees October growth led by EVs, SUVs and scooters; M&M, Ather and TVS outperform
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Nomura expects India's automobile industry to report growth across most segments in October, led by electric vehicles (EVs), SUVs and scooters, with Mahindra & Mahindra (M&M), Ather Energy and TVS Motor emerging as outperformers during Navratri. The brokerage estimates year-on-year volume growth of 7% in passenger vehicles (PVs), 12% in two-wheelers (2Ws) and 25% in medium and heavy commercial vehicles (MHCVs), while tractor volumes are expected to decline 7%.Dealer surveys suggest demand has remained strong through the festive period. However, Nomura cautioned that registration data for the first 18 days from the start of Navratri on October 11 does not capture the entire festive season, partly due to a lag in registrations. During this period, 2W registrations grew 9% year-on-year, while PV registrations declined 8%. The brokerage said the data needs to be viewed against the high base of 2025, when demand was supported by pent-up purchases following GST cuts.In the two-wheeler segment, growth in October is expected to be driven mainly by EVs and internal combustion engine (ICE) scooters, while motorcycle growth is likely to remain tepid. Within motorcycles, the 150cc category recorded growth, while 125cc sales declined. In passenger vehicles, EVs and large SUVs above four metres drove demand, while hatchback sales remained soft.Among automakers, Ather Energy and TVS Motor outperformed in the two-wheeler segment during Navratri, while Royal Enfield and Bajaj Auto underperformed. In passenger vehicles, M&M was the outperformer. Nomura said these trends could change, as the main festive season, including Diwali on November 8, was still ahead.The brokerage said automakers' guidance has been better than expected, with most companies projecting high-single-digit to low-double-digit growth in the second half of FY27, compared with its earlier expectation of low- to mid-single-digit growth. However, it remains cautious about rural demand amid rising interest rates, inflation and oil prices. Weakening rural demand in South India and Maharashtra poses downside risks to its FY27 tractor volume growth estimate of 5%.Segment-wise estimatesNomura estimates October PV wholesales at around 502,000 units, up 7% year-on-year, while retail sales are expected at 457,000 units, down 22%. This could add 36,000 units to dealer inventory. It expects the PV industry to grow around 13% in FY27 and 6% in FY28.Two-wheeler wholesales are estimated at 2.49 million units, up 12%, while retail sales are expected at 2.272 million units, down 30%. The brokerage projects industry volume growth of 8.7% in FY27 and 6.6% in FY28.MHCV wholesales are estimated at 41,500 units, up 25%, and retail sales at 43,700 units, up 24%. Nomura has raised its FY27 MHCV industry growth estimate to 13% from 8%, while retaining its FY28 estimate at 5%.Tractor wholesales are expected to decline 7% year-on-year in October, reflecting weaker rural demand and a higher base in the corresponding period last year.Two-wheeler EV sales are estimated at around 216,600 units in October, up 44% year-on-year and accounting for approximately 9.5% of the industry. Among key players, TVS is estimated to have sold 60,000 units, Bajaj Auto around 46,300 units, Ather 30,600 units and Hero MotoCorp around 29,200 units.Nomura said rising electrification should benefit companies with a strong EV presence in their portfolios, while higher oil prices could further strengthen the case for EV adoption. It continues to prefer M&M, Hyundai Motor India, Ather Energy, TVS Motor and Sona BLW Precision Forgings (Sona Comstar), all rated 'Buy'.The brokerage also flagged continued commodity-cost pressure in the third quarter of FY27, although most automakers expect EBITDA margins to remain stable sequentially, supported by pricing actions.
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