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2Ws and CVs trail FY26 growth estimates

Demand for two-wheelers (2Ws) seems to have revived to some extent in Jun’25, though demand for CVs and PVs remained weak. In PVs, except for MM, the other three listed companies—MSIL, TTMT and HMI—posted a decline in volumes in Jun’25. MM continued to outperform its peers and posted 18% YoY growth in UVs (down 10% MoM). In 2Ws, except for BJAUT, the other three listed players—TVS, RE and HMCL—posted double-digit growth in volumes in Jun’25. Despite this recovery in Jun’25, 2W volumes for the four listed players are still up only 1% YoY in 1QFY26, well below our full-year estimate of ~7% growth. CV wholesale volumes were weak in Jun’25 due to pre-buying seen in retails ahead of the mandatory driver cabin regulations that were implemented from Jun’25. As a result, aggregate CV sales for the three listed entities declined 3% YoY. CV volumes fell 2% YoY in 1Q and continue to lag the full-year growth estimate of ~5%. In tractors, MM (+13%) continued to outperform Escorts (2%). Tractor momentum is likely to remain healthy given favorable demand indicators. In Jun’25, only MM in tractors and HMCL have outperformed our estimates. On the other hand, MSIL, MM UV, BJAUT, TTMT PV and VECV posted sales below our estimates. Our top OEM picks remain MSIL and MM.

* PVs (below estimates): PV wholesale volumes continued to show weakness and were down 4% YoY for the four listed companies (below our estimates). Among listed peers, MM continued to outperform peers. MM’s UV volumes rose 18% YoY but fell 10% MoM (below our estimates). MSIL sales declined 6% YoY to 168k units (below estimate). While exports saw strong momentum with 22% YoY growth, domestic sales were down 12% YoY. Hyundai also posted 6% YoY decline in PV sales (in line). TTMT PV sales were down 15% YoY (below estimates). While Jun’25 was relatively weak for PVs, listed players ended 1Q with 1% YoY growth.

* 2Ws (in line): BJAUT sales inched up 0.6% YoY to 361k units (below estimates). While exports were up 21% YoY, domestic sales were down 13% YoY. TVSL continued to outperform peers and posted 21% YoY growth in total vehicle sales to 402k units (in line with our estimate). 2W sales grew 20% YoY and 3W sales rose 42% YoY. Overall, exports grew 54% YoY to 117k units. EV sales declined 9% YoY to 14.4k units. HMCL’s Jun’25 sales grew 10% YoY to 556k units in a positive surprise; however, its 1Q volumes were down 11% YoY. RE volumes grew 22% YoY to 89.5k units, in line with our estimate. Its key growth driver was exports, which jumped 79% YoY to 12,583 units. After the recovery in Jun’25, 2W sales for the four listed players rose just 1% YoY in 1Q.

* CVs (in line): CV wholesales were weak in Jun’25 due to pre-buying seen in retails ahead of the mandatory driver cabin regulations that were implemented from Jun’25. For TTMT, overall CV sales declined 5.4% YoY to 30,238 units (in line). MHCV/LCV sales declined 8%/3% YoY in Jun’25 to 14k/16.2k units. AL posted 2.6% YoY growth in CV volumes to 15,333 units (in line with our estimate) in Jun’25. While MHCV sales were up 3.3% YoY, LCV sales grew 1.5% YoY. Within MHCVs, truck sales declined 11% YoY, whereas bus sales grew 56% YoY. VECV sales declined 1% YoY in Jun’25 to 7.4k units. Overall, in 1Q, CV sales for the three listed players fell 2% YoY.

* Tractors (above): For MM, tractor volume rose 13% YoY (above our estimate). However, Escorts continued to underperform and posted 2% YoY growth in volume to 11.5k units (in line). Overall, tractor growth momentum is likely to remain intact in FY26, backed by expectations of a normal monsoon, the announcement of higher MSPs by the government, higher reservoir levels, and improved liquidity in rural areas.

* Valuation and view: Most of the key segments continued to trail behind expectations. While 2W demand seems to have recovered a bit in the last two months, overall 2W volumes for the four listed entities inched up 1% in 1Q – well below the forecast of ~7% growth for FY26E. CVs were down 2% in 1Q compared to our forecast of mid-single-digit growth for FY26E. MSIL is our top pick among auto OEMs as its upcoming new launches and the current export momentum should drive healthy earnings growth. We like MM given the uptrend in tractors and healthy growth in UVs.  

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