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In Q4FY25, OEM stocks under our coverage delivered mixed performance, with the market’s preference continuing to shift toward premium vehicles across categories.

* The PV segment grew 4.1% YoY, primarily driven by sustained demand for SUVs, with Mahindra & Mahindra (M&M) reporting a strong 24.3% YoY revenue growth. However, passenger car volumes continued to decline, underscoring the shift in consumer demand toward SUV’s.

* The 2W segment expanded by 5.3% YoY, led by strong growth in higher displacement models, (reflected in Eicher Motors' revenue growth of 23.1% YoY) and robust export performance (TVS Motor Company posting 16.9% YoY revenue growth). Meanwhile, the <110cc segment remained under pressure, indicating a continued consumer preference shift towards more premium offerings.

* The Commercial Vehicle (CV) segment grew 4.5% YoY, showing early signs of a recovery. Growth was supported by the resumption of construction and infrastructure activity, along with stable rural demand.

OEM Q4FY25 Financial Performance

* For the companies under our coverage, 2W OEMs posted a revenue growth of 10.3% on a YoY basis and PV OEMs saw a 12.7% revenue growth on a YoY basis. On the EBITDA margin front, OEMs under our coverage saw a margin decline of 41bps YoY and 69bps QoQ.

Positive Outlook for Auto Ancillaries: Driven by Premiumisation

* The automobile ancillaries under our coverage registered solid performance, with revenue growth of 16.8% YoY, while the EBITDA margin was down 70bps YoY but up 56bps QoQ.

* For auto ancillary space, we remain positive driven by new product launches in FY26. We expect auto ancillary companies under our coverage to continue benefiting from the trend of premiumisation and technological upgrades.

Impact of restrictions on export of rare earth magnets by China:

China’s restrictions on neodymium-based rare earth magnet exports are creating supply chain risks for Indian auto OEMs, especially in EVs, hybrids, and premium ICE vehicles. With China accounting for over 80% of global supply and export approvals still pending, Indian manufacturers face production disruptions starting July 2025. This is driving up input costs, extending lead times, and prompting OEMs to build inventories as a shortterm buffer. In the longer term, the industry is accelerating efforts to diversify supply chains, invest in rare earth recycling, and develop alternative motor technologies. The situation is pressuring margins and could delay EV rollout timelines unless the licensing bottlenecks are addressed soon.

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