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Monthly dispatches for the PV and tractor segments exceeded expectations in Dec’24, growing ~21% and ~20% YoY, respectively. In the domestic 2W segment, BJAUT volumes declined by 4% YoY; HMCL, TVSL, and RE are yet to announce their numbers. A key highlight was MSIL's impressive performance with volumes of ~178k units, surpassing our estimate of ~150k, driven by growth in the lower-end segment alongside SUVs. MM reported robust growth in tractor volumes, whereas ESCORTS saw a decline. CV dispatches were largely in line, with MHCV volumes remaining flat YoY and LCVs growing by 6% YoY. AL has not yet disclosed its numbers.

* 2Ws (below estimate): BJAUT volumes declined by 4% YoY to 272.2k (est. 295k). Domestic 2W dispatches fell YoY for the third consecutive month, down ~19% YoY in Dec’24. 2W exports grew by 15% YoY. HMCL, TVSL, and RE are yet to report their numbers.

* PVs (above estimate): Overall PV wholesales grew 15% YoY, with passenger cars and UVs likely to have grown by 31% and 15% YoY, respectively. MSIL’s volumes stood at 178k units (+30% YoY, est. 149.6k), mainly driven by strong 35% YoY growth in the mini and compact segments. For MSIL, domestic volumes grew 27% YoY to 141k units and exports jumped 39% YoY. TTMT’s PV volumes grew 1.4% YoY to 44.3k units (in line). Hyundai’s volumes were below our estimate, down 7% YoY at 61.3k units (est. 66.6k), as domestic volumes declined 2% YoY and exports fell 20% YoY. MM UV volumes grew by 17% to 63k units (in line)

* CVs (in line): Overall CV volumes grew 2% YoY in Dec’24. CV sales for TTMT declined 1% YoY to 33.9k units (est. 34.8k). LCVs grew 4% YoY, while MHCVs dipped 6% YoY. VECV sales grew 4% YoY to 8.3k units (in line). AL is yet to announce its volumes for the month.

* Tractors (above estimate): MM tractor sales grew 20% YoY to 23k units (est. 87.9k), while Escorts reported a decline of 11% YoY to 5.5k units (est. ~6k). MM in its press release indicated that the overall agricultural sector is showing optimistic signs of favorable Kharif and rabi crop seasons, higher water reservoir levels and favorable sentiment among farmers, indicating strong growth ahead.

* Valuation and view: While the 2W segment has outperformed PVs so far in FY25, we expect its growth to moderate for the rest of the year. MSIL is our top pick among auto OEMs as it continues to be a play on the rural recovery with an attractive valuation. Additionally, we like MM for its healthy demand momentum in SUVs and recovery in tractors. We also like Hyundai as it appears well-aligned to benefit from the industry trends toward UVs.

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