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Auto demand continued to be upbeat across all segments even in Dec’25. As per retail trends in Vahan, all segments are likely to post double-digit growth in the month. In the PV segment, we expect the four listed players to post 19% YoY growth in dispatches. Except HMIL, we expect the other three PV OEMs to post 20% and above growth in the month. In 2Ws, aggregate retail growth for the top four players is expected to be around 10%, while dispatches are expected to grow 20% as OEMs look to normalize inventory after a strong festive season. Within 2Ws, retail growth continues to be driven by RE and TVSL. Demand momentum, even in CVs, has been strong, and we expect the top three CV OEMs to post 19% aggregate growth in Dec. Even tractor demand has remained healthy, with the top two OEMs likely to post about 20% YoY growth in tractors. We expect auto demand to remain healthy in the coming quarters as well, led by GST rate cuts and favorable rural sentiment. Our top OEM picks are MSIL, MM and TVSL.

* PVs: After a strong festive and wedding season in Nov, PV demand continued to be healthy even in Dec. Players like MSIL and TTMT continued to push demand with healthy discounts to sustain the growth momentum. MSIL is expected to sustain its growth momentum on the back of its new launch, Victoris, revival in small car demand, and strong momentum in exports, led by e-Vitara ramp-up. Driven by a healthy revival in the compact SUV segment, we expect TTMT to post double-digit growth in Dec. Further, MM is also likely to maintain its healthy growth momentum in Dec. We expect even HMIL to post double-digit growth, largely driven by healthy momentum in exports. Overall, for Dec, we expect the PV segment to post 19% YoY growth in dispatches, largely in line with retail growth.

* 2Ws: Like PVs, 2W demand seems to have remained intact in Dec. The key demand driver is positive rural sentiment, along with the GST rate cut benefit. Within OEMs, we expect RE and TVSL to continue to outperform peers even in Dec. On the other hand, retail sales for HMCL and BJAUT seem to be relatively weaker. However, this is likely to be a temporary phenomenon given the solid sales growth concluded in the last couple of months and the momentum is likely to revive in coming months given the upcoming wedding season in 4Q and positive consumer sentiment. Further, one has to note that dispatches for all players are likely to remain healthy given the relatively lean stock with dealers. Hence, overall, we expect 2W dispatches to grow 20% YoY for Dec.

* CVs: Demand trends seem positive for all segments within CVs. We are seeing a good demand in the LCV segment, which is possibly a function of a pick-up in consumption trends in the country. Even MHCV demand has held up well in Dec, which is visible in Vahan retails. The current demand momentum is likely to sustain in the coming months given the positive sentiment and favorable lead indicators. Overall, we expect the CV segment to post 19% YoY growth in dispatches in Dec.

* Tractors: This segment has been seeing strong momentum since the beginning of FY26. A normal monsoon, healthy crop patterns, and improved Mothers, have boosted rural sentiment. Further, the government has lowered the GST rate to 5% for this segment, not only on tractors but also on components. Given these favorable drivers, we expect the demand momentum to remain strong in this segment going forward. Overall, we expect the tractor segment to post a healthy 20% YoY volume growth in Dec.

* Valuation and view: Following the GST rationalization, demand has picked up across segments and seems to have remained intact even after the festive season. A notable trend is that entry-level vehicles, both 2Ws and PVs, are seeing a marked pickup in demand. With a recovery in demand, we expect discounts to gradually reduce after the festive season. MSIL is our top pick among auto OEMs, as its new launches and the current export momentum are likely to drive healthy earnings growth. We also like MM, given the uptrend in tractors and healthy growth in UVs. In 2Ws, we are positive on TVSL. Our top auto ancillary picks are Endurance, SAMIL, and Happy Forgings.

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