Sales of cars and two‑wheelers have bounced back strongly, and analysts expect most Indian auto makers to post double‑digit profit growth in the December quarter.
Why auto sales are picking up
After the government trimmed the goods and services tax (GST) on vehicles in September, demand rose across all segments. The boost continued through the Navratri‑Diwali festive season, especially for cheap entry‑level two‑wheelers and passenger cars, making them more affordable for price‑sensitive buyers.
Dealers also offered attractive discounts in December, keeping the sales momentum high and helping the sector close the quarter with solid growth.
Profit outlook for major makers
Brokerages covering the sector project a healthy rise in earnings:
- Motilal Oswal expects a 27% year‑on‑year (YoY) rise in net profit for most OEMs, with the lowest growth at 13% for Hyundai Motor and the highest at 62% for TVS Motor.
- Axis Direct forecasts revenue, EBITDA and profit after tax (PAT) to grow about 26‑28% YoY, driven by GST cuts and stable commodity prices.
- Choice Institutional Equities sees overall revenue, EBITDA and PAT up roughly 25‑24% YoY, thanks to strong post‑festive demand.
All three brokerages agree that margins are likely to stay steady or improve slightly, thanks to a richer product mix (more exports) and price hikes taken over the past year.
Top stock picks from the brokerages
- Maruti Suzuki – favored by both Motilal Oswal and Axis for new launches and export growth.
- Bajaj Auto – highlighted by Axis for its strong sales and margin outlook.
- Eicher Motors – praised by Axis for solid performance.
- Mahindra & Mahindra – recommended by Motilal Oswal due to rising tractor demand and utility‑vehicle sales.
Key takeaways for investors
- Sales recovery is broad‑based, covering both two‑wheelers and passenger cars.
- GST reductions and stable commodity inflation are supporting higher profits.
- Most major OEMs are expected to post double‑digit earnings growth in Q4.
- Analysts’ top picks are Maruti Suzuki, Bajaj Auto, Eicher Motors and Mahindra & Mahindra.
Remember, this is just an opinion, not a prediction. Do your own research and consider talking to a certified financial adviser before making any investment decisions.