Importantly, retail demand remained robust even after the holiday season, keeping dealer inventories tight and supporting wholesale momentum in the fourth quarter, helped by the ongoing wedding season.Within two-wheelers, scooters continue to outpace motorcycles this year, while mopeds remain moderate. Growth is increasingly shifting towards premium and mid-engine motorcycles, with the 150-250cc segment emerging as one of the fastest growing categories, following a sharp turnaround in the second half of the year.
The >250cc segment also saw healthy double-digit growth, driven by resilient discretionary demand. However, entry-level motorcycle categories remain mixed, indicating a gradual recovery rather than a uniform recovery across the mass segments.
Passenger vehicles have benefited from strong traction from commercial vehicles, which now make up about two-thirds of the total mix. Both autos and UV autos saw a sharp recovery in the quarter, translating into mid-single digit growth year to date.
New launches, model refreshes and improving consumer sentiment have fueled momentum, while certain older models remain under pressure. Electric variants in the UV sector are also gaining more and more ground, albeit still from a relatively small base. Commercial vehicles have shown a steady recovery, with most sub-segments posting high single to low double digit growth since the start of the year. Freight operators have benefited from improved freight activity, while the passenger bus segment has shown selective outperformance thanks to replacement demand and regional tenders.
Key growth drivers include tax rationalization, improving affordability, continued post-holiday shopping and tighter channel inventories.
At the same time, challenges remain in the form of an uneven recovery in the entry-level categories and increased competitive intensity in popular sub-segments, which could limit pricing power in the short term.
Structurally, the sector is witnessing a shift towards larger displacement motorcycles, an increasing mix of commercial vehicles into passenger cars and gradual electrification in certain categories.
With inventories tight and discounts expected to gradually decline, the medium-term outlook remains constructive, supported by demand normalization, a strong product pipeline and improving operating leverage as volumes increase.
TVS Motors-TP: 4500
TVS Motor has been the only domestic 2W OEM to consistently gain market share in key segments over the past decade, backed by strong execution and brand building.
This has translated into an earnings CAGR of ~23% and a sharp improvement in RoCE from ~22% over the last ten years to ~36%, underscoring the quality and sustainability of growth. For Q3FY26, EBIT margin has increased from ~8% in FY19 to ~12.3% in FY25 and ~12.6% in 1HFY26.
Supported by cost initiatives and operating leverage, we expect margins to improve by ~150 basis points to ~13.8% by FY28E. We estimate that TVS will achieve a revenue/EBITDA/PAT CAGR of ~21%/26%/29% in FY25-28E, driven by continued market share gains, a strong launch pipeline and gradual margin expansion.
Maruti Suzuki TP: 19,937
Maruti Suzuki continues to demonstrate its leadership strength in the Indian passenger car market, supported by a strong product mix, renewed demand for small cars and a growing export base. In Q2 2026, revenues increased 13% year-on-year, with an EBITDA margin of 10.5%, above expectations, driven by higher realizations and cost control, while PAT remained largely in line.
The GST rate reduction has significantly increased affordability in the small car segment, leading to a strong festive season with over 400,000 retail sales. The recently launched Victoris and e-Vitara models have further enhanced MSIL’s SUV positioning, while exports increased 42% year-on-year and are on track to exceed expectations.
With its robust SUV pipeline, multi-technology approach (CNG, hybrid, EV) and long-term focus on achieving 50% PV market share, we reiterate BUY, expecting an earnings CAGR of 17.5% over FY25-28E.
(The author is Head of Research – Wealth Management, Motilal Oswal Financial Services)
(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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