Investor sentiment, especially among foreign institutional investors (FIIs), has turned constructive as volume growth rebounds on the back of festive momentum, price reductions and improving rural sentiment.
The most visible impact of the tax cut has been in the entry-level passenger car and two-wheeler categories, where effective price reductions of between eight and 15 percent have significantly increased consumer interest.
Original Equipment Manufacturers (OEMs) reported robust bookings during the Navratri period, with deliveries and footfalls in certain segments almost doubling year-on-year.
However, this recovery has been supported by attractive discounts and deferred financing arrangements, which have made investors cautious about whether demand will continue once these incentives wane in early calendar year 2026.
Passenger vehicle volumes are expected to grow by more than eight percent in fiscal 2027, with commercial vehicles expected to remain the main driver of expansion. The two-wheeler segment is witnessing an encouraging revival in both motorcycles and scooters, while electric variants continue to retain market share despite tariff adjustments. The commercial vehicle (CV) segment, on the other hand, remains at an inflection point, with investors keeping a close eye on the first signs of an upturn.
Improved price discipline and deleveraging of balance sheets have strengthened the sector’s fundamentals, although concerns remain about long-term structural shifts, such as the impact of the Dedicated Freight Corridor (DFC) on freight demand.
Auto parts manufacturers continue to struggle with tariff-related uncertainty, complicating margin assessment and investor valuation.
Segments related to commercial vehicles and exports are hardest hit by this volatility, while domestically focused players see modest gains as OEM production increases.
Overall, the medium-term outlook for the automotive industry remains positive, supported by lower car prices, a festive mood in the retail sector and strong export appeal. Yet the most important test lies in maintaining demand after the seasonal peak.
With the Auto Index recently outperforming the Nifty after an extended lag, investors appear balanced but cautious, awaiting evidence that the post-GST momentum marks the start of a sustainable growth cycle rather than a temporary surge.
Maruti Suzuki: Buy| Target Rs 18,501
A richer product mix with higher contributions from SUVs, CNG and exports continues to drive Maruti Suzuki’s growth trajectory. The CNG mix increased to thirty-five percent, led by robust demand for SUV CNG models post the GST cuts.
A healthy EBITDA margin of 10.4 percent reflects a favorable mix and cost discipline. Profit after tax grew two percent year-on-year to ₹37.1 billion, helped by higher other income from forex and commodity hedge profits.
Exports increased by thirty-seven percent year-on-year, underscoring strong foreign demand. With upcoming SUV launches, including the e-Vitara, and effective supply chain management, the company remains well positioned for steady domestic and export-led expansion.
Endurance Technologies: Buy| Target Rs 3311
Endurance aims to increase its 4W mix from 25% currently to 45% of consolidated sales. To achieve this goal, the company is setting up a new factory in Maharashtra to fulfill new orders and working with a Korean partner to achieve 4W suspensions.
The proposed mandate of 100% Anti-lock Braking (ABS) for 2Ws from January 26 would increase Endurance’s addressable market almost tenfold.
With established ABS capabilities and backward integration, the company is targeting a 25% share of this expanded market, a major upside catalyst.
The company will continue its industry leading performance with a robust order book of INR 36.1 billion, generating a CAGR of ~18%/21%/20% in revenue/EBITDA/PAT in FY25-27. The consistent outperformance in both the domestic and European markets underlines the operational strength and excellent execution.
(The author is Head – Research, Wealth Management, Motilal Oswal Financial Services Ltd)
(Disclaimer: Recommendations, suggestions, views and opinions expressed by experts are their own. These do not represent the views of the Economic Times)
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