Auto Sector Set for Massive Surge in June as Nomura Projects EV Inflection Point and Strong Demand Momentum

Auto Sector Set for Massive Surge in June as Nomura Projects EV Inflection Point and Strong Demand Momentum​

Nomura has signaled a period of continued robust growth for the Indian automobile industry in June, anticipating strong demand across passenger vehicles (PVs) and two-wheelers (2Ws). The brokerage maintains that sustained demand momentum is evident despite recent escalations in fuel and vehicle prices. This expectation highlights a promising outlook, with EV adoption reaching what Nomura calls an "inflection point."

Broking Expectations for Segment Growth in June​

Nomura projects significant volume increases across major auto segments. Passenger vehicle wholesales are expected to jump 26% year-on-year. Two-wheeler volumes are forecasted to grow by 18%, while medium and heavy commercial vehicle (MHCV) sales are set to climb 12%. Additionally, tractor sales are anticipated to increase by 7% in June.

The brokerage estimates that passenger vehicles will achieve approximately 401,000 units in wholesales, with retail sales expected near 384,000 units, suggesting an inventory addition at dealerships. Two-wheeler wholesome volume is projected at 1.87 million units, and MHCV wholesales are estimated to reach around 33,000 units.

Key Automaker Performance Projections​

The sector's various players are forecasted to see varied successes in June. Tata Motors’ passenger vehicle business is expected to lead the charge with sales set to jump a substantial 70% year-on-year as demand for its electric vehicles consistently surpasses supply capabilities. Maruti Suzuki is also projected to see domestic PV sales rise about 30% year-on-year.

In the two-wheeler space, Bajaj Auto's total sales are anticipated to increase by 26%, while Royal Enfield (Eicher Motors) is expected to report a strong 34% growth in June sales. Hero MotoCorp's volumes, however, are forecasted to remain flat for the month.

Commercial Vehicles and Electric Mobility Outlook​

For the commercial segment, Nomura estimates that Ashok Leyland’s MHCV volume will increase by 4%, while Tata Motors Commercial Vehicles is expected to record a solid 19% growth. The accelerating momentum in electric mobility is evident across segments, with EV penetration estimated at 7.4% in passenger vehicles and 10.5% in two-wheelers during June.

Challenges Ahead: Margin Pressure and Supply Disruptions​

While the demand outlook remains bright, Nomura has cautioned about potential headwinds for automakers. The industry is likely to face margin pressure in the first quarter of FY27 due to the delayed impact of elevated commodity costs. Relief might arrive in subsequent quarters as raw material prices begin to ease.

In specific corporate updates, Hyundai Motor India is expected to report a 19% decline in overall volumes. This temporary downturn is attributed to production disruptions following a fire at one of its supplier's facilities; however, Nomura anticipates that production will normalize by the close of June.

Nomura Reiterates Sector Preference and Outlook​

The brokerage has reiterated a preference for several key companies within the auto sector. Mahindra & Mahindra, Hyundai Motor India, Ather Energy, and Sona Comstar are among those stocks where Nomura maintains strong conviction following its analysis of market dynamics and future growth trajectory.