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The Indian automotive sector has navigated a turbulent fiscal year 2024-25 (FY25), marked by subdued overall sentiment, particularly in the second half. A confluence of macroeconomic headwinds, uneven rural recovery, evolving consumer preferences, and regulatory changes has led to a patchy performance across vehicle categories. Growth projections for the last quarter of the fiscal year 2024-25 reflect this divergence sharply, ranging from a modest 2% to an impressive 23%, depending on product segments and market dynamics.
Volume trends show mixed signals Year-on-year (YoY), tractor sales have outperformed, benefiting from relatively stronger rural demand. However, on a sequential basis, the same category has seen the sharpest decline, pointing to weakening momentum and seasonal moderation. Excluding tractors, other segments have posted modest YoY growth.
Two-wheelers and three-wheelers have registered low to mid-single-digit increases, but also faced sequential declines, weighed down by tepid rural sentiment and limited festive season impact. Also Read | NBFCs set for seasonal gains in the fourth quarter despite pockets of pressure In contrast, passenger vehicles (PVs) and commercial vehicles (CVs) have shown sequential growth. PVs have gained from rising SUV demand and new model launches, while CVs have been buoyed by infrastructure and construction activity.
Revenue performance: Broadly positive, yet uneven The auto sector is expected to post around 10% YoY growth in revenue, though the January-March 2025 quarter has seen mixed outcomes. The two-wheeler segment exhibits the widest performance range, with estimates between 2% and 23%, influenced by product mix and pricing dynamics. Four-wheelers are projected to deliver double-digit growth, supported by strong demand in premium and mid-segment offerings.
Meanwhile, the tractor segment is expected to outperform on a revenue basis with an estimated 20% YoY growth, driven by earlier demand strength and pricing actions. Company-specific highlights Despite the volatile landscape, certain companies have stood out. In the two-wheeler space, TVS Motor and Eicher Motors have emerged as bright spots.
TVS is benefiting from urban recovery and premiumisation trends, while Eicher’s Royal Enfield continues to perform steadily in both domestic and export markets. Among four-wheelers, Mahindra & Mahindra (M&M) leads the pack with a robust SUV portfolio, a strong order book, and a resilient agricultural equipment division. Within the auto ancillary space, Samvardhana Motherson is poised to outperform, thanks to its global diversification and higher content per vehicle.
Valuations and stock market trends Valuations across the auto sector appear attractive, with most companies trading at or below their five-year average price-to-earnings (P/E) multiples. However, stock performance in 2025 has been largely negative, barring a few exceptions like TVS, Eicher, Maruti Suzuki , and Ashok Leyland . The steepest declines have been witnessed in the auto ancillary space, owing to global uncertainty.
Optimistic near-term outlook Looking ahead, the outlook appears cautiously optimistic. The anticipated implementation of the 8th Pay Commission and potential income tax reliefs are expected to boost demand in the two-wheeler and entry-level car segments. Additionally, the MET department’s forecast of an above-normal monsoon is likely to strengthen rural income and revive tractor demand.
"FY25 has been a muted year for PVs, but not entirely disappointing,” said Ashish Jain, Research Analyst at Macquarie Capital. “After a strong festive season, demand softened, particularly in the entry-level segment. However, if you look at the long-term growth trajectory from the fiscal year 2018-19 (FY19) to the fiscal year 2024-25, we have remained in line with the 5–6% CAGR trend.
” Macquarie expects overall PV growth to remain in low single digits in he fiscal year 2025-26 (FY26), but continues to favour M&M, citing strong model cycles, upcoming EV launches, and a robust tractor segment. Also Read | Cement firms set for healthy quarter on demand recovery, firm prices In the electric two-wheeler space, Ather Energy has gained momentum, with April VAHAN data showing a market share of 14–15%. The company’s dominance in the South is expected to broaden as it expands distribution to other regions.
Among traditional two-wheelers, TVS remains Macquarie’s top pick due to market share gains across segments and resilient export recovery. Bajaj Auto , while showing promise in electric two-wheelers, has faced setbacks in its CNG motorcycles and key segments like 125cc motorcycles, where competition has intensified. For the full interview, watch the accompanying video Catch all the latest updates from the stock market here.
