Auto Stocks Roar as Nomura Highlights Strong June Sales Surge, Pitting EV Leaders Against ICE OEMs

Auto Stocks Roar as Nomura Highlights Strong June Sales Surge, Pitting EV Leaders Against ICE OEMs​

Market Reactions to Robust Auto Sales Data​

Shares of Mahindra &Mahindra (M&M) and Ather Energy saw gains on Monday after Nomura reaffirmed its positive outlook following robust auto sales trends in June. M&M stock rose 1.14% to ₹3,172.70 on the NSE, while Ather Energy gained 0.74%, trading at ₹1,138.40. Hyundai Motor India, another firm favored by Nomura, traded slightly down 0.35% to ₹1,986.50.

OEM Favoritism Amid Industry Momentum​

Nomura stated that "healthy demand momentum continued across segments in June." The brokerage noted significant growth in wholesale volumes for medium and heavy commercial vehicles (MHCV), which surged by 24% year-on-year, vastly surpassing Nomura's estimate of 12%. Tractor wholesale volumes also exceeded expectations, rising 14% year-on-year against the firm’s forecast of 7%.

Key Retail Sales Figures from FADA​

The positive wholesale trends were substantiated by retail sales data released by the Federation of Automobile Dealers Associations (FADA). Total vehicle retail sales rose 21.83% year-on-year and 1.03% month-on-month, reaching 25.57 lakh units in June. Passenger vehicle sales grew at a strong clip, increasing 28.63% year-on-year and 2.05% sequentially to 4.10 lakh units.

Two-Wheeler and Three-Wheeler Segment Performance​

Two-wheeler sales maintained high growth, rising 21.22% year-on-year but experiencing a slight decline of 0.89% month-on-month, hitting 18.28 lakh units. Three-wheelers also saw healthy expansion, with sales increasing 16.20% year-on-year and 8.40% sequentially to 1.20 lakh units.

Wholesale Trends in Vehicle Segments​

In terms of wholesale volumes, passenger vehicle wholesale volumes increased by 23% year-on-year, reaching 393,000 units. This was slightly below Nomura's expectation of 26% growth. Two-wheeler wholesale volumes rose 18%, aligning with the brokerage’s estimates.

EV Penetration and Brokerage Warnings​

Nomura highlighted that consumer interest in electric vehicles (EVs) remains robust. Electric vehicle penetration reached 7.5% among passenger vehicles and 10.6% in two-wheelers during June. The brokerage strongly reiterated its view that "India's EV penetration is at an inflection point."

Strategic Risk Assessment for Auto Manufacturers​

The Nomura report cautioned companies with traditional internal combustion engine (ICE) platforms. It noted that these "ICE-dominant OEMs which don't have strong EV capabilities face de-rating risk." The brokerage also mentioned that easing geopolitical tensions helped moderate commodity prices, improving the cost outlook for automakers.

Persistent Margin Pressure and Stock Picks​

Despite improved input costs, margin pressure is expected to persist during the June quarter. Input costs were estimated at around 2.3% for passenger vehicles and 3.4% for two-wheelers. Nomura confirmed that within its coverage universe, it continues to prefer M&M, Hyundai India, Ather, and Sonacoms.

Individual Company Performance Insights​

The brokerage offered nuanced views on specific companies in its coverage area. It noted that wholesale volumes for Tata Motors' commercial vehicle division, Ashok Leyland, and Mahindra &Mahindra’s tractor segment were above the estimates provided by Nomura. Conversely, Maruti Suzuki, Eicher Motors (Royal Enfield), and Hero MotoCorp reported volumes marginally below expectations.