The auto industry is buzzing with activity as the implications of a 25% tariff announced by former US President Donald Trump continue to unfold. This scenario raises an intriguing question: What factors have led Nuvama Institutional Equities to project that growth in wholesale sales of tractors, two-wheelers, and passenger vehicles will surpass that of commercial vehicles? The brokerage has identified TVS Motor, Mahindra & Mahindra (M&M), Motherson Sumi, and Uno Minda as its top picks in the automotive sector.

Promising Trends in Two-Wheeler Growth

Nuvama anticipates a robust double-digit growth in tractor sales, driven by positive consumer sentiment and a favorable comparison to previous sales figures. However, the outlook for the two-wheeler and passenger vehicle markets is more subdued, expected to see only low single-digit growth. This cautious forecast is attributed to significant inventory levels with dealers in anticipation of the upcoming festival season. Notably, within the passenger vehicle segment, TVS Motor and Eicher Motors, particularly its Royal Enfield brand, are expected to outperform their competitors in the two-wheeler category.

Export Growth Fuels Optimism

The optimism isn’t limited to domestic markets. Exports are expected to play a vital role, particularly in Latin America and Africa, which are projected to experience double-digit growth in sales. Nuvama forecasts a 22% year-on-year increase in total volumes for Eicher Motors.

Commercial Vehicle Market Faces Challenges

In contrast, the commercial vehicle (CV) sector is bracing for a slight downturn, with projections indicating a 1% decline in domestic market volumes. Factors contributing to this trend include selective financing from lenders and moderate fleet utilization, which are hindering new vehicle acquisitions. On a brighter note, increased E-Way Bill generation compared to last year suggests improved freight availability for transport operators.

Positive Outlook for the Automotive Sector

Despite these challenges, Nuvama remains optimistic about the automotive industry as a whole. In a recent research report, the brokerage asserted that they expect tractors, SUVs, and two-wheelers to achieve high single-digit growth between FY25 and FY27, outpacing the commercial vehicle sector.

Stock Performance Highlights

• TVS Motor: The stock saw a 1% increase, reaching a peak of ₹2,453.25 on the National Stock Exchange. Over the past five trading days, it has gained 2.3% and 4% over the last month. In the past year, shares have appreciated by 15%.

• M&M: Conversely, shares dipped by 1.7%, hitting an intra-day low of ₹2,695.55. The stock has seen a decline of 3.7% in the last five days, but it boasts a 45% return over the past year.

In comparison, the Nifty Auto index has decreased by 0.9% over the last five days while showing a modest gain of 0.88% in the past month, alongside a 1.7% increase over the previous year.

This evolving landscape in the automotive sector showcases a mixture of challenges and opportunities, prompting investors to keep a close eye on market trends and stock performances.