Nifty Auto Roars Back: 49% Surge in 9 Months, with Motherson, Bajaj Auto, and M&M Leading the Charge

Indian auto stocks have made a strong comeback recently after struggling in August and early September. This rally is mainly driven by two-wheeler (2W) stocks, as many expect sales to improve during the festive season and thanks to good rainfall across the country.

In September alone, the Nifty Auto index has risen nearly 5%, bringing its total gain for the year to an impressive 49%. Every stock in this index has performed well, with Samvardhana Motherson leading the way with a staggering 110% increase.

Bajaj Auto is not far behind, showing an 86% gain, while Mahindra & Mahindra (M&M) has risen by 84%. Other strong performers include Bosch, TVS Motor, Hero MotoCorp, Ashok Leyland, and Maruti Suzuki, all seeing gains between 30% and 45% this year.

The Nifty Auto index has shown growth in eight of the last nine months, with February seeing the highest increase of 6.16%.

Why Are Two-Wheeler Stocks Thriving?

The success of two-wheeler companies comes from a boost in sales, better export numbers, and a growing focus on electric vehicles (EVs). Many 2W manufacturers are rolling out new EV models at competitive prices and expanding their market presence.

The rally is also fueled by hopes of a possible rate cut from the Reserve Bank of India (RBI) and the government’s efforts to support the rural economy.

Post-Covid, the recovery for two-wheelers has been slower than for passenger vehicles, but it has been gaining momentum since FY23. In Q1 FY25, two-wheeler sales saw strong growth, and experts expect this trend to continue into FY25.

Analysts believe that a good monsoon, improved consumer confidence, and increased government spending will boost demand in FY25, potentially bringing sales back to levels seen in FY19.

In the long run, demand for personal transportation is expected to grow steadily, driven by economic growth, rising incomes, and urbanization. These factors will help support the industry’s continued growth.

Challenges for Passenger Vehicle Stocks

When it comes to passenger vehicle (PV) stocks, M&M is the only standout. Both Maruti Suzuki and Tata Motors have lagged behind the Nifty Auto index this year.

The industry is facing challenges, including slow sales growth, which has resulted in excess inventory. After enjoying robust growth in FY22, FY23, and FY24, driven by post-Covid recovery, PV sales have declined significantly in FY25.

In July, PV sales fell for the first time in two years, a trend that continued into August. However, new model launches and discounts from automakers have sparked hope for a sales rebound soon.

M&M has thrived during this slow period thanks to strong demand for utility vehicles. The company has increased its market share by launching several models and expanding its product lineup.

Goldman Sachs recently raised its target price for M&M to ₹3,900, noting improvements in profit margins and a growing preference for SUVs. M&M’s competitive pricing compared to Maruti Suzuki also makes it an appealing option.

The company recently launched a five-door version of the Thar SUV, boosting sales. Management has forecasted significant growth for its utility vehicle segment in FY25.

In August, M&M reported sales of 43,000 PVs, a 16% increase year-over-year and a 4% rise from the previous month, driven by demand for its new models.

On the other hand, UBS has lowered its target price for Tata Motors to ₹825, citing concerns about Jaguar Land Rover’s (JLR) declining order backlog, which affects a large part of its revenue. They warned that rising discounts and a lack of new vehicle launches could hurt JLR’s financials for FY26.

In August, Tata Motors’ sales dropped 3% year-over-year and 1% month-over-month. To boost demand, the company is offering discounts of up to ₹2 lakh.