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PV industry seeing growth moderation

* We have analyzed volume data of the 2W/PV segments for Aug’24 and YTDFY25. The 2W ICE segment (+15% YoY in YTDFY25) continues to outperform the PV segment (+2% YoY).

* In terms of domestic 2W wholesales YTDFY25, motorcycles have grown 12.7% YoY, while ICE scooters have grown 21.4% YoY. In total domestic 2Ws, HMSI is now the market leader with a market share of 29.8% for YTDFY25 (+465bp YoY). HMCL has fallen to the 2nd place for the first time with a market share of 29.2% (-240bp YoY).

* Domestic PV wholesales have grown 2% YoY in YTDFY25, with UVs up 13% YoY. Cars have seen a decline of 14% YoY in YTDFY25. The contribution of cars in the overall mix has declined 630bp YoY to 33%, while it has improved 620bp YoY to 63% for UVs. In PVs, MSIL has lost its market share by 220bp to 40.5%, primarily due to a continued shift in the industry mix toward UVs, in which it has a relatively lower market share than in cars.

Growth for domestic 2Ws (excluding HMSI) moderating gradually

* Overall, the motorcycle industry has grown 12.7% YoY in YTDFY25. However, excluding HMSI, the industry has grown only 5.7% YTD.

* In domestic motorcycles, HMCL continues to lose market share, which now stands at 42.7% (-180bp YoY).

* In fact, all players, except HMSI, have lost share for YTD in motorcycles: BJAUT down 100bp to 16.9%, TVS down 80bp to 9.6%, and RE down 110bp to 6.5%

* HMSI has significantly gained share YTD by 520bp to 20.7% and is now the 2nd largest player in motorcycles.

* In fact, overall in domestic 2Ws, HMSI is now the market leader with a market share of 29.8% in YTDFY25 (+465bp YoY). HMCL has fallen to the 2nd place for the first time with a market share of 29.2% (-240bp YoY).

Segmental trends: 100cc segment:

* The 100cc segment continues to underperform the industry and has posted 7.3% YoY growth.

* HMSI has significantly outperformed this segment with 58% YoY growth.

* As a result, HMSI has gained share by 240bp to 7.6% in this segment largely from BJAUT (-140bp to 8.7%) and TVSL (-70bp to 5.5%).

* HMCL has marginally lost share by 20bp to 78.2%. 125cc segment:

* The 125cc segment has seen 20% YoY growth so far in FY25.

* Here again, HMSI has been the key growth driver with 44% YoY growth. It has recovered its lost share to 45.2% (+770bp) for YTD.

* Despite the ramp-up of Xtreme-125R, HMCL has lost share by 110bp to 19.3% in this segment. A peculiar point to highlight for HMCL in Aug’24 is that Xtreme 125R has now ramped up to 27,668 units. Despite such a sharp ramp up, its 125cc segment sales declined 4% YoY in Aug’24 possibly due to cannibalization!

* Even BJAUT (-360bp to 24.1%) and TVS (-300bp to 11.3%) have lost share YTD in this segment to HMSI.

* TVS Raider volumes sharply declined in Aug’24 to 26,923 units and it has seen a 5% volume decline so far in FY25. On the other hand, Pulsar 125 has seen just 4% YoY growth YTD.

* BJAUT has produced 9,505 units of Freedom 125 in its 2nd month. 150-250cc segment:

* This segment has posted 22% YoY growth for YTDFY25.

* Here again, HMSI has outperformed with 82% YoY growth on a low base.

* As a result, while HMSI has gained 710bp market share to 21.6%, BJAUT has lost 110bp share to 31.6%. Even Yamaha has lost 470bp share to 20%.

* HMCL continues to lose share despite new launches in this segment (down 70bp to 3.3%). 250cc+ segment:

* This segment has underperformed the broader market and posted just 3% YoY growth YTD.

* RE has underperformed within the segment and posted a 3% YoY decline. The new Guerilla 450 clocked sales of 2,205 units in Aug’24. However, despite this launch, RE’s 400-450 segment has grown just 12% as Himalayan sales declined.

* BJAUT has more than doubled its volumes in this segment, led by the Pulsar400 and Triumph launches. Both models are selling around 2.5-3k units per month each.

* HD X440 sales fell to 885 units in Aug’24 (avg. monthly sales of 900 units YTD). Mavrick sales were also lower at 170 units only.

Scooters ICE segment

* The segment has seen 21% YoY growth YTD.

* Here, HMSI has gained 230bp market share to 50.1% largely from HMCL (down 180bp to 4.8%).

* Both TVSL and Suzuki have largely maintained their share in scooters so far in FY25. PV update – MM and Toyota gain market share

* PV industry declined 1.8% YoY in Aug and is up 2% YoY for YTDFY25.

* In overall PVs, MSIL has lost market share by 220bp to 40.5%, primarily due to a continued shift in the industry mix toward UVs, in which it has a relatively lower market share compared to cars.

* Both MM and Toyota have gained a similar market share of around 180bp for YTDFY25 in PVs.

Car segment:

* Car sales declined 18% YoY in Aug’24 and are down 14% YoY for YTD.

* In cars, MSIL maintains its top position with a 63.5% market share.

* While TTMT has gained 140bp share to 12.4%, Hyundai has lost 120bp share and Honda has lost 100bp share for YTDFY25.

UV segment:

* UV segment grew 8.5% YoY in Aug’24 and is up 13% for YTD.

* MSIL maintains its market share in UVs at 25.8%.

* For MSIL, Brezza (19k units in Aug’24 and 17% YoY growth YTD), Fronx (12k units in Aug’24 and 15% YoY growth YTD) and Ertiga (18.6k units in Aug’24 and 51% YoY growth YTD) continue to be the key growth drivers.

* Among top gainers, while MM has gained 120bp share to 19.1%, Toyota has gained 220bp share to 9.4%.

* While MM has gained share, its Thar sales stood at 3342 units and Thar Roxx sales stood at only 926 units in the first month. Scorpio continues to be a strong growth driver for MM (13.8k units in Aug’24 and 39% YoY growth YTD), along with XUV700 (9k units in Aug’24 and 21% YoY growth YTD). Even the XUV3XO clocked 9k units in Aug’24.

* On the other hand, TTMT has seen the biggest decline in market share, down 250bp to 13.6%.

Valuation and view

* While we expect the 2W segment to continue to outperform other segments even in FY25, this positive outlook seems to be fully priced in after the recent strong rally in 2W stocks.

* MSIL is our top pick among auto OEMs as it continues to be a play on rural recovery with an attractive valuation. We also like MM, given healthy demand momentum in both SUVs and tractors for FY25.

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