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We attended the ‘Looking Ahead Conclave’ of Society of Indian Automobile Manufacturers (SIAM) in New Delhi, wherein the industry offered category-wise projections for FY26. As per OEMs and industry experts, the PV industry is expected to grow by 1-2% in FY26 (this is lower than our and Street estimates of ~5-7% growth each in FY26E), 2Ws by 8-10% (largely as estimated), 3Ws by 6-8% (largely as estimated) and CVs by 4-5% in FY26 (largely in line). Some highlights from SIAM conclave are:

Two-wheelers – FY26 volume to grow by 8-10%:

SIAM expects FY25 2W volume to grow ~10.8% and FY26 volume by 8-10%, in line with our estimates at 8% each. The EV outlook is buoyant and expects e-2W to grow to 1.5-1.6mn units in FY26, taking the overall penetration to ~8%. Industry officials expect the Mahakumbh in Uttar Pradesh to have a positive impact on 2W demand in Q1FY26.

PVs – FY26 volume to grow ~1-2%:

Leading PV firms in India expect FY26 PV volume to grow at 1-2%. Also, the SUV segment may continue to be the growth driver (up by 8- 9%), with SUV share likely improving to 60% in FY26 from the current ~55%. We assume FY26E volume growth at ~6%, ahead of SIAM’s forecast. Industry officials still expect muted growth for first time buyers, thereby impacting their growth outlook. The income tax cut is likely to have a limited benefit for PV customers as per officials as increasing cost of vehicles remains a concern.

CVs – FY26 volume to grow at ~4-5%:

Medium and heavy commercial vehicle (MHCV) sales are expected to grow in mid single-digit, as per the industry versus our estimates of 4%. MHCV busses may continue to outperform trucks and may even grow by at least 25% in FY25. Interest rate cuts and revival in Govt spending are expected to be positive factors while there might be some negative impact of DFC on trucks segment.

Three-wheelers – FY26 volume to grow by ~6-8%:

In FY26, SIAM expects threewheelers to grow 6-8% versus 7% estimated, taking overall volume to 0.8mn units. The Passenger segment is expected to grow within 5-6%, with Cargo growing slightly higher than that. Revival in exports is also likely with growth of 8-10% YoY in FY26.

Our view:

Mahindra & Mahindra (MM IN), TVS Motors (TVSL IN), Maruti Suzuki (MSIL IN) and Bajaj Auto (BJAUT IN) are our preferred picks in the space. We expect 2W demand to continue to outperform other segments through FY25-27. Favorable monsoons, improving terms of trade and government policies may help revive rural demand, which augurs well for 2Ws and tractors.

CV demand may continue to remain muted, despite the government’s focus on reviving infrastructure spending. We expect an 8% volume CAGR for 2Ws through FY25E-27E, 5% for PVs, 7% for 3Ws, 3.6% for tractors and 0% for MHCVs. We lower our earnings estimates for Hero Motocorp (HMCL IN) by 3-5% for FY26E-27E and lower our valuation multiple to 16x. Hence, we lower HMCL’s TP to INR 4,558 from INR 5,510 but maintain Accumulate.

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