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We hosted 13 Indian auto OEMs and ancillaries for our flagship Chasing Growth 2025 conference. Key takeaways are (1) domestic PV industry volumes are expected to grow low single digits yoy in FY2026E; newer launches and EV segment to drive growth, whereas entry-level segment demand trends remain weak, (2) domestic 2W demand trends remain steady (scooter and >125 cc motorcycle to outpace 110 cc motorcycle segment) and export segment recovery to continue, (3) CV segment demand trends to remain muted in the near term, (4) tractor segment to continue growth momentum in the coming quarters and (5) slowdown in export markets to weigh on growth prospects of select auto ancillaries. Remain selective; prefer PV OEMs (MM, MSIL and HMI) over 2W OEMs (HMCL, BJAUT and EIM).

Domestic PV industry volume growth pegged at low single digits in FY2026E

According to SIAM and domestic OEMs, domestic PV industry wholesale volumes are expected to grow low single digits yoy (flat yoy growth in FY2025E) in FY2026E, driven by (1) steady growth in the SUV segment due to newer launches and (2) an increase in BEV segment penetration, partly offset by continued weakness in entry-level segment demand and (2) a high base effect. However, we expect domestic PV industry volumes to grow 3-5%, driven by 6- 8% yoy growth for the SUV/MUV segments (newer launches) and 3-4% yoy growth for the hatchback/sedan segments (lower base). We expect M&M (higher SUV mix) and Maruti Suzuki (newer launches) to gain market share in FY2026E. We expect the export segment of Maruti Suzuki to continue its growth momentum, driven by newer launches (e-Vitara, Jimny 5-door and Fronx).

Domestic 2W demand trends remain steady; export segment recovery continues

SIAM expects domestic 2W industry volumes to grow 6-9% yoy, driven by (1) double-digit yoy volume growth in the scooter segment, led by urbanization and (2) high single-digit yoy volume growth in the >125 cc motorcycle segment. We expect scooter segment demand momentum to continue, but believe there is a downside risk to domestic motorcycle segment growth assumptions, given (1) its persistent weakness in the 110 cc motorcycle segment and (2) an increase in delinquencies for financiers, which may weigh on the growth. The companies highlighted that recovery in the export market continues, driven by (1) strong demand trends in LATAM and (2) a recovery in the African market.

Mixed outlook on M&HCV segment; tractor segment to maintain its momentum

While OEMs (Ashok Leyland) expect domestic M&HCV industry volumes to grow by mid-single digits yoy, auto ancillaries (Bosch, Bharat Forge and Sona Comstar) expect this segment’s growth to remain flat yoy in FY2026E. CV OEMs expect the margin trajectory to sustain, given pricing discipline, an increase in the non-CV mix and benign commodity prices. Tractor OEMs highlighted that near-term demand trends remain strong, owing to (1) an increase in Rabi sowing acreage, (2) higher reservoir levels and (3) an increase in MSP prices, resulting in favorable terms of trade for farmers. Tractor OEMs expect demand momentum to sustain going into 1HFY26E as well.

Exports markets to impact the growth prospects of select auto ancillaries

Companies highlighted that the demand outlook in the European market remains uncertain, led by (1) the impending US tariff threat on imports of components, (2) the regulatory transition with new CAFÉ emission norms kicking in from January 1, 2025, without adequate infrastructure and withdrawal of EV incentives and (3) the impact of EV resale value due to price cuts, which impacted the overall EV demand. Demand trends in the US appeared relatively better until 4QCY24; however, there is uncertainty looming in demand trends, owing to policy changes. Overall, we expect near-term demand trends to remain muted for auto ancillaries with global exposure.

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