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FY24 saw noteworthy growth in domestic PVs; wholesales/retails (Vahan) grew ~8.6%/9.3% YoY to ~4.2m/~3.95m units respectively (highest). We expect FY25E domestic PV industry to grow at 4-5%, largely on two counts: one, new product launches and growing CNG demand, and two, sustained growth in SUVs. We like TTMT (BUY) and MSIL (ADD) among PV names.

Domestic segmental PV volumes: Key insights

1) Premiumization - UV share in domestic PV was highest at ~51% in FY24E. New launch volumes grew at CAGR of ~33% over FY20-24E, with a share of ~30% vs 14% in FY20. UV1 accounted for >3/4th of UV share; UV2 share at ~23%, though growing, is off-peak. Shift back of market shares in favor of listed OEMs is a key positive. 2) PV segmental shift - entry segment stress, premiumization, and upgrades caused major shift among segments; share of mini/compact sedan/mid-size dropped to ~8%/7%/2% in FY24E (vs ~20%/12%/6% in FY17). Led by new launches positioned as micro-SUVs and favorable used cases, compact segment share remained stable at ~28% in FY24E (v/s ~30%/28% in FY16/FY20). 3) PV - Domestic OEMs aggregate market share was highest in 9 years at ~66.3% in FY24. This would be the highest market share gain of ~1.8% (post ~3% gain in FY18). Among global OEMs, Toyota gained highest market share of 1.3% to achieve peak India share of 5.7% in FY24. 4) Alternate fuel - CNG volumes grew at CAGR of ~43% over FY21-24E to ~593k units in FY24E with share of CNG increasing to ~14.1% (vs ~7.4% in FY21 and ~5.6% in FY17). CNG mix inching up across OEMs with MSIL at ~24% in FY24E (vs ~12% in FY21), TTMT at 14.5% in FY24 (vs 2% in FY21) and Hyundai at ~12% in FY24 (vs ~8% in FY21). 5) Retail market share - New launches saw MSIL/M&M gain ~50bp/350bp market shares in FY24 to 41.2%/17.2% respectively, while TTMT/KIA share declined by 160bp/80bp to 11.4%/5.6% respectively.

Premiumization: share of new launches near peak at ~30% in PVs in FY24E – UV share in PVs was at ~51% in FY24E (v/s ~21% in FY16), the highest. Led by new launches, volumes grew at ~23% CAGR over FY20-FY24E (v/s ~13% CAGR in FY16-FY20). The share of new launches (as % of PV) increased consistently to ~30% in FY24E from ~14% in FY20, leading to volumes CAGR of ~33% over FY20-24E. Of the total UV, share of UV1 (entry and sub 4- meter SUVs) accounted for ~76% (v/s peak share at ~84% in FY21). The decline in UV1 was primarily the outcome of successful new launches (XUV7OO, Alcazar, Scorpio N, Innova HyCross and Elevate.)

Segmental shift: Compact holds fort, UV gains, rest suffer decline – Stress on entry segment and premiumization caused major shift among sub segments, further supported by consistent decline in share of first-time buyers declined from ~47% in FY21 to ~41% in 3QFY24, leading to ~9% CAGR decline in mini segment (entry) in FY19-24E. The same trend holds true for compact sedan/mid-size segments with volume decline of ~8%/14.7% CAGR. New launches positioned as micro-SUVs and favorable used cases saw compact segment share stabilizing at ~28% in FY24E (v/s ~30%/28% in FY16/FY20)

Domestic OEMs aggregate market share highest in 9 years at ~66.3% in FY24 – A major rerating driver! - Led by aggressive new product launches and brand acceptance, aggregate market share of domestic OEMs is at a ~9 year high at ~66.3% of overall PV. This would be the highest market share gain of ~1.8% (post ~3% gain in FY18). Among global OEMs, Toyota gained ~1.3% market share to ~5.7% market share in FY24.

Alternate fuel - CNG mix in overall PV highest at ~14% in FY24– Industry CNG volumes grew at ~43% CAGR over FY21-24E (vs 0.2% CAGR in FY18-21) to ~593k units in FY24E. Share of CNG increased to ~14.1% (vs ~7.4% in FY21 and ~5.6% in FY17). The same for MSIL is highest at ~24%, TTMT at 14.5% and Hyundai at ~12%.

PV retails grew ~9.3% in FY24 (vs wholesales growth of ~8.6%) - Relatively better retail growth is the outcome of improved supply of automatic and CNG variants, especially from 2QFY24. New launches saw MSIL/M&M gain ~50bp/350bp market share in FY24 to 41.2%/17.2% while TTMT/KIA share declined by 160bp/80bp to 11.4%/5.6%.

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