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PL Capital, one of India’s most trusted financial services organizations, in its latest report titled “Automobiles – Monthly Update” highlighted that the Indian auto sector has started FY27 on a strong footing, with sustained volume growth across segments despite price hikes and reduced discounts by OEMs. The report noted that robust demand, especially in passenger vehicles (PVs) and tractors, continues to support sector momentum, although geopolitical risks and weather uncertainties remain key monitorables.

April 2026 dispatches witnessed broad-based growth across segments. PV volumes grew by ~20% year-on-year, driven by continued urbanization trends and rising preference for SUVs. Inventory levels remained healthy at ~28 days, significantly lower than ~52 days seen in March 2025, indicating strong demand absorption.

Overall Industry Trends Identified:

• Strong Annual Recovery: All major segments recorded double-digit Year-on-Year (YoY) growth compared to April 2025, signaling a much stronger start to the fiscal year
• Post-March Correction: Most domestic segments saw a Month-on-Month (MoM) decline, which is a standard seasonal trend as the industry cools off after the financial year-end "March surge"

Segment Highlights

• Two-Wheelers (2W): This was the volume powerhouse, moving 2.13 million units. While domestic demand stayed flat MoM, exports jumped 20.9% from March, showing massive international traction
• Passenger Vehicles (PV): Domestic sales reached 4,39,555 units, up 24.7% YoY. However, non-Maruti brands felt a sharper monthly cooling, dropping 14.4% MoM compared to the total industry’s 4.3% dip
• Commercial Vehicles (CV): This segment took the biggest monthly hit, with domestic volumes falling 26.9% MoM. This was primarily driven by a 44.6% drop in heavy trucks (M&HCV) following high year-end procurement in March
• Three-Wheelers (3W): The standout performer for growth, with total volumes up 53.5% YoY. Exports were the primary engine here, skyrocketing by 87.5% YoY
• Tractors: Defied the general monthly cooling trend by growing 3.3% MoM, reflecting sustained positive momentum in the rural economy

The two-wheeler (2W) segment posted strong growth, supported by a low base, while underlying demand trends indicate steady recovery. Commercial vehicle (CV) growth moderated but remained in double digits, reflecting stable economic activity. Tractor volumes continued their strong trajectory, supported by positive rural sentiment, though the potential impact of El Niño remains a key risk.

Amnish Aggarwal, Co-Head, Institutional Equities, PL Capital, said, “The auto sector has demonstrated resilience with a strong start to FY27, supported by healthy demand across segments and improving inventory levels. While geopolitical tensions and input cost pressures could weigh on sentiments in the near term, the underlying demand environment remains robust, particularly for PVs and rural-linked segments.”

Among OEMs, Maruti Suzuki and Tata Motors (PV) reported strong growth, driven by robust domestic demand and rising exports. Mahindra & Mahindra continued to see strong traction in tractors and utility vehicles, while Bajaj Auto witnessed significant growth led by exports and three-wheelers. Hero MotoCorp volumes surged on a low base, indicating recovery in the 2W segment.

However, certain challenges persist. Export trends remained mixed across companies, and supply chain disruptions impacted production for select OEMs. Additionally, the ongoing West Asia conflict has raised concerns around potential supply chain disruptions and cost inflation, which may impact demand going forward.

PL Capital remains ‘Overweight’ on the automobile sector, supported by strong demand fundamentals, improving rural outlook, and continued premiumization trends. The firm maintains a positive stance on key players including Mahindra & Mahindra (Buy), and Maruti Suzuki, Bajaj Auto, Hero MotoCorp, Eicher Motors, and TVS Motor (Accumulate).

Going ahead, PL Capital believes that while short-term volatility may arise due to geopolitical developments and weather-related uncertainties, the sector is well-positioned for sustained growth, supported by strong demand drivers, new product launches, and improving macroeconomic conditions.

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