For a while now, auto stocks have not been doing well in the market, especially over the last three months. The Nifty Auto Index dropped by almost 10%, while the overall index, Nifty, declined by only 4%. Two-wheeler companies, like Hero MotoCorp and Bajaj Auto, were hit the hardest, with their shares falling over 20%. Since the start of 2023, the auto industry has faced slow growth, continuing into the second quarter.
Bajaj Auto, India’s biggest two-wheeler maker, has warned that its sales growth will be slower in the upcoming months, which adds to the negative outlook. Most car manufacturers, except for Mahindra & Mahindra (M&M), have had a tough time, with popular brands like Maruti Suzuki and Tata Motors also seeing their shares fall by 6% and 16%, respectively.
However, the start of 2025 has brought some positive news for auto stocks, as sales numbers for December looked better than expected. Since the start of the year, the auto index has bounced back by nearly 3%.
Looking to the third quarter, various auto companies are getting ready for mixed results. Analysts think that passenger vehicles and tractors will benefit from festive season demand, while two-wheelers and commercial vehicles still face challenges. Despite these challenges, the passenger vehicle segment is expected to stand out with about 7% growth compared to last year.
Maruti Suzuki is predicted to have great results in the festive season, with an expected 11% increase in profits. Tractors are also seeing strong sales with a 14% increase year-over-year, driven by better rural demand. M&M is expected to lead the tractor market with a solid 30% growth in earnings.
On the flip side, two-wheelers are projected to only grow by 3% this year due to slow urban demand and inventory issues. Commercial vehicles may see flat growth because of high costs and low replacement needs. Tata Motors might have steady sales but could struggle to keep their profits high.
Lastly, while some costs have stabilized, marketing efforts during festive seasons and high input costs could squeeze profits for some auto manufacturers. Analysts are still confident in strong companies like M&M and Maruti Suzuki due to their solid overall performance and steady demand. For two-wheelers, TVS Motor is a preferred choice due to its robust rural presence.
In the future, management comments about rural recovery and pricing strategies will be crucial for shaping investor feelings about the auto industry.
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