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Healthy demand momentum persisted across segments even in February. As highlighted in our previous note, given the strong retail momentum visible in Vahan data for Feb’26, we had expected wholesale data to remain equally strong. Relative to our expectations, mass market 2W OEMs (ex BJAUT, which is yet to report) posted better-than-expected growth in February, even as RE underperformed peers. Though CV OEMs posted strong growth, it has been largely in line with our estimates. Among PV OEMs, while MM and HMIL sales were in line, MSIL and TMPV underperformed estimates. MSIL sales were below estimates, largely due to ongoing supply constraints, even as retails remained strong in February (+28% YoY). Further, while tractor growth rates remained strong, sales for tractor peers slightly lagged the elevated expectations. Overall, listed peers posted strong aggregate wholesale growth across segments: PVs at 13.5%, 2Ws at 35%, CVs at 28%, and tractors at 30%. With a recovery in demand, we expect discounts to gradually decline in the coming months. Among OEMs, MSIL, TVS, and MM are our top picks.

* PVs (mixed): Retail demand remained strong in February, as indicated in Vahan data across most players. Improved affordability has boosted consumer sentiment, leading to sustained demand. While MM and Hyundai posted growth rates in line with our estimates, TMPV and MSIL fell short. MSIL posted a 7.3% YoY growth to ~214k units (vs estimated 224k units). Its monthly sales continued to be impacted by supply constraints, even as retails rose 28% YoY in February. MSIL produced 223k units during the month, relative to the 226k units produced in Jan’26. Given the supply constraints, MSIL continues to manage dispatches across segments, supported by its flexible manufacturing lines. Wholesale growth was primarily led by exports, which increased ~57% YoY, even as domestic sales remained flat YoY. HMIL posted a ~13% growth YoY to 66k units, coming in line with our estimates. Exports continued to post healthy growth, rising 25% YoY to 13.7k units. Domestic sales grew 10% YoY to 52,407 units. TMPV posted a strong 35.3% growth YoY to 63.3k units. While the company outperformed peers, it missed our estimate of 67k units, as dispatches were down almost 11% MoM. MM also outperformed the industry, with a 19% YoY growth in UVs to 60k units (in line). Overall, the four listed PV players posted a 13.5% growth YoY for Feb’26 and an 8.9% YoY growth on a YTD basis.

* 2Ws (above): BJAUT is yet to report February sales. Similar to PVs, 2W demand remained strong during the month. TVSL delivered a healthy ~31% YoY growth to 529k units (slightly ahead of estimates of 503k). Growth was visible across all segments: motorcycles rose ~25% YoY, scooters rose ~34% YoY, and 3Ws rose 77% YoY to 21,446 units. Exports were also ahead of expectations, growing 26.6% YoY to 158k units (estimated 137k units). Even HMCL posted a strong ~44% growth YoY to 558k units (beating our estimate of 498k units), albeit aided by a relatively low base. Notably, HMCL retails rose 18% YoY for February, indicating that the company is also normalizing inventory levels with dealers. While the company’s exports increased 34% YoY, scooter sales grew 64% YoY. However, RE sales disappointed in February, growing ~11% YoY to 101k units (slightly below the estimate of 105k units), thereby underperforming peers. Domestic volumes rose ~13% YoY to 91k units, while exports fell 2% YoY to 9.7k units. Excluding BJAUT, the three 2W players posted a robust ~35% YoY growth in wholesale volumes in February

* CVs (in line): AL is yet to report its February wholesales. Sales of the other two listed players, VECV and TMCV, were in line with estimates. TMCV posted ~32% YoY growth in CV sales to 42.9k units. HCV sales rose 34.9% YoY, and LCVs rose 29% YoY. VECV sales grew 23.4% YoY to ~10k units for February. Excluding AL, on a YTD basis, the two CV players posted 13.7% YoY volume growth. The current demand momentum in CVs is likely to sustain in the coming months, given the positive consumer sentiment and favorable lead indicators, such as a pickup in freight demand, which is driving utilization levels and, in turn, improving fleet owner profitability.

* Tractors (below): This segment has witnessed strong momentum since the beginning of FY26, which is expected to sustain till the end of the fiscal. 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 a ~30% YoY growth in tractor volumes in Feb’26. While the growth rates remained strong, they were below estimates. MM posted ~34% YoY growth in tractor volumes to 34.1k units, coming in below our estimates. Escorts posted a ~20% YoY growth in tractors, underperforming our estimates. Combined tractor sales for both companies grew 22% YoY on a YTD basis.

* Valuation and view:

Demand momentum continues to remain healthy across most auto segments, even in February. Given the pickup in demand, inventory levels are likely to remain lean at OEMs, despite the expected wholesales push in 4Q. With a recovery in demand, we expect discounts to gradually reduce in the coming months. MSIL is our top pick among auto OEMs, as its new launches and the current export momentum are likely to drive healthy earnings growth. In 2Ws, we are positive on TVS as we believe its consistent outperformance can help sustain its premium valuations. We also like MM, given the uptrend in tractors and healthy growth in UVs. Our top auto ancillary picks are Endurance, SAMIL, and MSWIL.

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