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Domestic demand fails to revive in most segments, even in July

PV wholesale volumes continued to show weakness and grew 2% YoY for the four listed companies. Among listed peers, MM continued to outperform peers with double-digit growth. Overall, PV volumes for the four listed entities grew 1.5% YoY for YTD. In two wheelers, the four listed players have posted an 18.4% YoY growth in July. It is largely over a low base, as volumes are down 4% MoM for 2Ws. BJAUT is the only player to have posted just 3% growth, while all the other three listed peers posted healthy double-digit growth, albeit over a low base. Overall, 2W volumes for the four listed entities grew 5% YoY for YTD, largely driven by exports. In CVs, the three listed peers have posted 7% YoY growth in July, largely fueled by exports and bus sales. For the first time in this fiscal, both TTMT and AL have outperformed VECV. Overall, for YTDFY26, CV sales for the three listed players have remained flat YoY. In tractors, MM continued to outperform Escorts. Thus, domestic demand for most of the key segments, except tractors, continued to trail behind expectations. Our top OEM picks are MSIL, MM, and HMI.

* PVs (in line): PV wholesale volumes continued to show weakness and grew 2% YoY for the four listed companies. Among listed peers, MM continued to outperform peers. MM’s UV volumes rose 20% YoY to 49.8k units (ahead of our estimate of 48k). MSIL sales grew 3% YoY to 180.5k units (in line). While exports saw strong momentum with 32% YoY growth, domestic sales were down 1.5% YoY. Hyundai posted a 7% YoY decline in PV sales (in line). TTMT PV sales were down 11% YoY (in line) to 40,175 units. Overall, PV volumes for the four listed entities grew 1.5% YoY for YTD.

* 2Ws (mixed): The four listed players have posted an 18.4% YoY growth in July. However, this is largely over a low base, as volumes are down 4% MoM. BJAUT sales grew 3% YoY to 366k units (in line). While export momentum continued to be strong (28% growth in July and 19% YTD), domestic sales were down 13% YoY. BJAUT domestic 2W sales remained weak and were down 18% YoY. TVSL continued to outperform peers and posted a strong 29% YoY growth in total vehicle sales to 456k units (ahead of our estimate). 2W sales grew 29% YoY, and 3W sales rose 21% YoY. Overall, exports grew 46% YoY to a record high of 142k units. EV sales grew 10% YoY to 23.6k units. HMCL’s July’25 sales grew 22% YoY to 450k units (ahead of our estimate), largely over a low base of last year (down 19% MoM). RE volumes grew 31% YoY over a low base of last year to 88k units (down 2% mom), in line with our estimate. Its key growth driver was exports, which jumped 95% YoY to 11,791 units. Overall, 2W volumes for the four listed entities have grown 5% YoY YTD, largely driven by exports.

* CVs (in line): The three listed peers have posted 7% YoY growth in July, largely led by exports and bus sales. For TTMT, overall CV sales grew 7% YoY to 28,956 units (in line). MHCV/LCV sales grew 15%/1% YoY in July’25 to 13.7k/15.3k units. Also, TTMT CV growth is driven by 57% YoY growth in exports, while domestic sales were up 4% YoY. AL posted 8% YoY growth in CV volumes to 15k units (in line with our estimate) in Jul’25. While MHCV sales were up 13% YoY, LCV sales grew just 1% YoY. Within MHCVs, truck sales grew 4% YoY, whereas bus sales grew 42% YoY. VECV sales grew 7% YoY in July’25 to 7.1k units. Overall, for YTDFY26, CV sales for the three listed players have remained flat YoY.

* Tractors (in line): For MM, tractor volume rose 6% YoY to 28.7k units (in line). However, Escorts continued to underperform and posted 2.7% YoY growth in volume to 7.1k units (in line). Overall, tractor growth momentum is likely to remain intact in FY26, backed by onset of a normal monsoon, the announcement of higher MSPs by the government, higher reservoir levels, and improved liquidity in rural areas.

Valuation and view: As highlighted above, while 2W headline numbers appear strong, these are largely over a low base of last year, with the four listed peers posting 5% growth for YTD, despite robust growth in exports. PVs continue to see low single-digit growth. Also, in CVs, while TTMT and AL have posted strong growth, these are driven by strong exports and bus demand, and YTD growth for the three listed peers remained flat YoY. Thus, domestic demand for most of the key segments continued to trail behind expectations. MSIL is our top pick among auto OEMs, as its upcoming new launches and the current export momentum should drive healthy earnings growth. We like MM given the uptrend in tractors and healthy growth in UVs.

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