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Auto wholesales remained strong in Dec’25 and surpassed our expectations for quite a few OEMs. We attribute this strong demand momentum in wholesales to: 1) positive consumer sentiment led by GST rate cuts, 2) strong marriage season in Nov’25 after an equally strong festive season, 3) relatively low base given weak demand macro last year. These factors resulted in robust wholesale growth for most OEMs across segments. PV wholesales for the four listed players grew 18.5% YoY, led by MM (+23%, in line) and MSIL (+22%, in line). On the other hand, TATA PV (+14.1%) and HMIL (+6.6%) underperformed peers. In 2Ws, BJAUT has yet to report its numbers, while the other three OEMs posted robust 43% YoY growth in wholesales. Similarly, the top three CV players registered healthy 26% YoY growth, with broadly similar growth by each of them. Tractor OEMs maintained strong performance as well, with the two listed entities posting ~39% YoY growth each in Dec. While wholesales were strong, retails were equally healthy across most segments. Thus, OEMs are likely to have ended 2025 with lean inventory, which we believe should help them sustain the volume momentum in 4QFY26 as well, in our view. We will review our growth expectations soon. Within OEMs, MSIL, MM, and TVS are our top picks.

* PVs (mixed): After a strong festive and wedding season in Nov, PV demand continued to be healthy even in Dec. Players continued to push demand with healthy discounts to sustain the growth momentum. MSIL’s Dec sales rose 22.2% YoY to ~218k units (in line), driven largely by strong demand in the mini segment, UVs and compact cars. However, after a record-high show in Nov, exports were weak and declined 31.2% YoY in Dec. MM posted strong UV sales of 50.9k units, marking a 23% YoY increase, in line with our estimates. TATA PV volume, although up 14% YoY to 50.5k units, underperformed peers and came in below our estimates. Hyundai also delivered a disappointing performance, with sales growing by just 6.6% YoY to 58.7k units. Domestic sales were below expectations, flat YoY at 42.4k units. Exports were in line with estimates, up ~27% YoY to 16.3k units. Overall, PV wholesale volumes grew 18.5% YoY for the four listed players in Dec and 7.2% YoY on a YTD basis.

* 2Ws (above): BJAUT has yet to report Dec sales. Like PVs, 2W demand was strong in Dec. TVSL delivered strong ~50% YoY growth in Dec to 481k units (ahead of estimates). Strong growth was visible across all segments: motorcycle up ~50% YoY, scooter up ~48% YoY and 3Ws doubled YoY to 20,318 units. Even HMCL posted a robust ~41% growth YoY to 456k units (beating our estimate of 397k units). HMCL wholesales were surprising as its retails declined 11% YoY, as per Vahan. Exports saw 21% growth YoY, supported by new market entries and portfolio expansion. Additionally, scooter sales nearly doubled YoY in Dec, led primarily by the new Destini and Xoom launches in the ICE segment and positive sentiment toward the VIDA VX2. Further, RE posted 30.3% YoY growth to 104k units (slightly above estimates). Domestic sales grew 37% YoY, while exports declined 10% YoY to 10.3k units. Excl. BJAUT, three 2W players posted a robust 43% YoY growth in wholesales in Dec.

* CVs (above): Demand trends seem positive for all segments within CVs, with current demand momentum likely to remain intact in the coming months given the positive sentiment and favorable lead indicators. The three listed players posted a strong ~26% YoY growth in CV sales in Dec’25 over last year’s low base.

Additionally, all of them posted robust MoM growth as well, indicating steady demand momentum. VECV sales were in line, while AL and TATA CV were above estimates. TATA CV posted 25.5% YoY growth in CV sales to 42.5k units. HCV sales rose 30.4% YoY and LCVs were up by 20.8% YoY. VECV sales grew 24.7% YoY to 10.3k units for Dec. Ashok Leyland outperformed the industry, growing 27% YoY to 21.5k units. On a YTD basis, the top three CV players posted 10.2% YoY growth.

* Tractors (above): This segment has been seeing strong momentum since the beginning of FY26 and this momentum is expected to remain intact in the coming months. Higher reservoir levels, healthy crop patterns, and improved MSPs, among others, have boosted rural sentiment, leading to strong retail demand. The two listed tractor players posted ~39% YoY growth in tractor volumes in Dec’25. MM posted a strong ~39% YoY growth in tractor volumes to 31.9k units, outperforming our estimates. Escorts also posted a strong ~39% YoY growth in tractors, coming in ahead of our expectations. Combined tractor sales for both companies are up 19% YoY on a YTD basis.

* 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. Further, wholesales were strong in Dec, and retails were equally healthy across most segments. Thus, OEMs are likely to have ended 2025 with lean inventory. This would help them sustain the volume momentum in 4QFY26 as well. With a recovery in demand, we expect discounts (in PV segment) to gradually reduce. 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.

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