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The auto pack delivered strong performance in Jun-26, with growth momentum rebounding across segments and players (also reflected in Vahan retail volumes).

Key observations:

1) In 2W dispatches, EIM RE outpaced HMCL; 2W industry retail momentum returned to 21% yoy (22/14/8% in 2HFY26/Apr/May-26) with robust growth across the pack.

2) PVs also saw strong growth across OEMs, barring HMIL (Jun-26 volumes hit by fire incident at key supplier’s facility; management expects recovery in 2Q), with TMPV leading (despite supply constraints for Sierra in 1Q which are being resolved).

3) MHCV dispatches were robust, with TMCV/AL logging >25% yoy growth; MHCV retail momentum also returned, with volumes up ~20% yoy (16/11% in Apr/May-26).

4) While tractor dispatches were healthy at M&M and Escorts on favorable macros, the management indicated potential moderation in volumes over coming quarters amid monsoon uncertainty/rising input costs.

5) Retail E-2W penetration reached fresh high of 10.6% (May-26/FY26: 9.3/6.6%); industry volume growth surged to 75% yoy (2HFY26/Apr/May-26: 23/63/64%); TVSL led, followed by BJAUT/Ather; E-3W penetration at 47%, with M&M leading, followed by BJAUT/TVS; E-PV penetration at new high of 7.6%, with TMPV leading

2Ws: EIM RE outpaces HMCL; recovery in retail growth momentum visible

EIM RE logged 27% yoy growth to ~114k units, led by 34% rise in domestic volume amid a 12% decline in exports. HMCL’s volume declined ~2% yoy to ~541k units, as a 4% drop in domestic sales was partly offset by ~33% growth in exports. 2W industry retail momentum rebounded, with volumes up ~21% yoy (2HFY26/Apr-26/May-26: 22%/14%/8%). E-2W penetration reached a fresh high of 10.6% (May-26/FY26: 9.3/6.6%); E-2W industry volume growth accelerated ~75% yoy in Jun-26 (vs 23/63/64% in 2HFY26/Apr-26/May-26), TVSL was #1, followed by BJAUT/Ather. TVSL and BJAUT are yet to report their dispatch volumes

PVs: TMPV leads; M&M/MSIL continue to grow; HMIL remains weak

TMPV led the pack, with domestic PV dispatches up 67% yoy to ~62k units (EV volumes were up ~183% yoy in Jun-26); TMPV has indicated a positive outlook, led by a robust order book and easing supply constraints. MSIL’s total volumes grew ~19% yoy to ~200k units (down ~17% mom owing to planned maintenance shutdown), led by ~29% surge in UV volumes and ~22/13% growth in domestic cars/exports. M&M’s domestic PV dispatches were up ~28% yoy to ~60k. HMIL’s overall volumes declined ~16% yoy to ~51k units, primarily due to production losses (13.9k units) caused by fire incident at one of its key suppliers; the management expects recovery in 2Q. PV industry retail growth was ~27% yoy (2HFY26/Apr26/May-26: 20/13/27%); E-PV penetration continued to rise – now at 7.6% (4.5% in FY26).

CVs: TMCV/AL post strong dispatch growth; MHCV retail demand also rebounds

TMCV reported 31% yoy growth in domestic CVs to 36.6k units, led by 27%/35% yoy growth in MHCVs/LCVs. AL’s domestic CV volumes rose 26% yoy to ~18k units, led by 26%/28% growth in MHCV/LCVs. MHCV retail momentum returned, with volumes up ~20% yoy (16%/11% in Apr/May-26). TMCV (+25% yoy) outpaced AL (+18%) in MHCV retails.

Tractors: Escorts led the pack; potential volume moderation ahead

Escorts/M&M saw ~20%/12% yoy growth in domestic dispatches to ~58k/13k units. Escorts expects growth to moderate in coming quarters amid monsoon uncertainty and rising input costs. M&M reiterated emerging El Niño conditions as a key monitorable for demand, but sustained government support is expected to partly cushion the impact on the Kharif season

Our view: Prefer 2Ws and CVs over PVs; SPRL, CAL, JKI, and Pricol in ancillaries

Amid a strong rebound in underlying demand (also witnessed in Vahan retails for Jun-26), we favor 2W/CV OEMs vs PVs, due to a similar demand trajectory, albeit better pricing flexibility amid commodity pressures and limited new model launch pipeline in FY27 (historically a key growth driver for PVs). In 2Ws, while we favor TVSL/Ather on structural basis (Yet another mega shift in motion; Ather the frontrunner), BJAUT offers a better riskreward – valuation at 21x FY28E PER vs 29x/26x for TVSL/EIM RE (The best risk-reward within 2Ws; upgrade to BUY). We prefer to play the CV upcycle with TMCV (A turning CV cycle; TMCV to lead). In Ancillaries, we favor Shriram Pistons (Strong Q4; subsidiaries to drive next leg of scale-up), Craftsman Automation (Strong Q4; guides to mid-teens FY27 revenue growth), JK Tyre (Near-term RM headwinds to persist; valuation support emerging), and Pricol (Robust Q4; multiple strategic initiatives to accelerate growth).

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