Auto Sales Periodical: October 2026 Strong Festive Demand Drives Growth by Monarch Networth Capital
The Indian automobile industry reported healthy volume growth in October 2026, supported by strong festive-season demand, improved consumer sentiment and sustained replacement demand. GST rationalisation and improved affordability further supported vehicle demand across most segments. Passenger vehicles, two-wheelers, three-wheelers and commercial vehicles witnessed healthy growth, indicating broad-based demand momentum. However, the farm equipment segment remained weak, reporting double-digit volume de-growth, reflecting continued pressure on tractor demand. While we continue to monitor key ground level indicators through our channel checks, we believe that growth will moderate for the PV, CV and 2W industry in 2HFY27 on a high base, while tractor sales will remain lacklustre. Therefore, we prefer diversified auto ancillaries, which have several levers for content per vehicle expansion, over and above the underlying industry growth.
From our coverage universe, Minda Corporation, RK Forgings and Sundram Fasteners are our top picks, given their potential to outgrow the underlying industry. Minda Corporation is expected to deliver strong growth through increasing content per vehicle, while RK Forgings is well-positioned to benefit from a healthy new order booking and expansion in casting. Sundram Fasteners is expected to benefit from its export orders and diversification into non-auto. Additionally, valuations at current market prices appear very attractive for all three stocks. On the 2W heavy auto ancillaries, we will watch out for signs of sustained underlying industry growth before turning positive.
Passenger Vehicles: The passenger vehicle segment reported strong volume growth in October 2026, supported by festive-season demand, improved affordability, rising exports and favourable consumer sentiment. The festive calendar, with Navratri and Dussehra falling in October, resulted in a concentration of vehicle deliveries, while advance dealer stocking ahead of Dhanteras and Diwali in November further supported wholesale dispatches. The benefits of GST 2.0 have improved vehicle affordability and purchasing power, supporting both first-time buyers and replacement demand. Demand continued to be skewed towards SUVs and compact SUVs, with a wider product portfolio and new model launches supporting consumer traction. Despite a high base, Maruti Suzuki, Tata Motors and Hyundai reported strong double-digit yoy volume growth driven by large order backlog, while M&M reported relatively muted growth of 1% yoy, largely due to a higher base. Overall, the October performance reflects a favourable demand environment, although the sustainability of growth beyond the festive period, order backlogs and normalisation of dealer inventory will remain key monitorable.
Two Wheelers: The two-wheeler segment reported strong volume growth in October 2026, supported by festive demand and healthy export momentum. Hero MotoCorp reported dispatches of ~7.34 lakh units, while TVS Motor recorded 28% yoy growth, crossing the 7 lakh-unit mark. Exports remained a key growth driver. A key highlight was the acceleration in EV adoption, with electric two-wheeler volumes rising 48% yoy to a record 2.23 lakh units, accounting for ~10% of industry volumes. TVS Motor led the EV segment with dispatches of 60,429 units, while Hero Vida gained traction. In contrast, Ola Electric's volumes declined 26% yoy. Going ahead, improving rural demand, replacement buying, premiumisation and rising EV penetration are expected to support industry growth. However, we expect the growth to taper in 2HFY27 on a high base for 2W.
Commercial Vehicles: The commercial vehicle segment reported healthy volume growth in October 2026, reflecting sustained demand across freight and passenger transportation. Force Motors, Volvo Eicher and Tata Motors reported strong volume growth of 45%, 35% and 27% yoy, respectively, while M&M recorded 17% growth. SML Mahindra reported relatively muted growth of 1% yoy. The M&HCV segment continued to outperform, indicating healthy fleet utilisation and replacement demand. Going ahead, expansion in logistics activity, fleet replacement and sustained infrastructure spending are expected to support demand.
Farm Equipment: The farm equipment segment remained weak in October 2026, with Escorts Kubota and M&M reporting volume declines of 10% and 12% yoy, respectively, while VST Tillers Tractors witnessed a sharper decline of 25%. The weakness was partly attributable to the high base of the previous year. Additionally, below normal and uneven monsoon rainfall have raised concerns over farm incomes and near-term tractor demand. While exports provided some support, with M&M and Escorts Kubota reporting healthy export growth, domestic demand remains subdued. Going ahead, post-harvest cash flows and improvement in rural liquidity will be key factors driving recovery in the segment.
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