Demand for passenger vehicles could improve in Dec; commercial segment to be weak: Motilal Oswal

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26 Aug, 2025 12:21

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Auto sales data for last few months has been mixed due to rising oil prices and liquidity crunch in NBFCs, but the trend seems to be changing in some parts of the segment.

"After interaction with leading passenger vehicle (PV)/ 2-wheeler (2W) channel partners, we note that demand for PVs has recovered partially but remains weak for 2Ws and commercial vehicles (CVs). As a result, inventory levels remain higher than the desired level for calendar year-end," Motilal Oswal said.

While reasoning for improvement in retail demand for PVs in December compared to November 2018, it is said the demand is led by a fall in fuel prices, attractive year-end discounts, and new products.

But inventory levels are expected to come down to 2-3 weeks for the industry by end-Dec-18 (versus 4-5 weeks as of end Nov-18), it added.

It expects PV wholesales to grow around 5 percent YoY in December.

The research house said as demand for commercial vehicle remains weak in December, led by deferral in purchase due to the constraints in vehicle financing and the impact from an increase in axle load capacity, it expects CV wholesale to decline 10-12 percent YoY, primarily led by the M&HCV segment.

According to the brokerage, medium & heavy commercial vehicle segment sales are expected to fall 19-21 percent YoY.

The base for December 2018 remains high due to pre-buy in December 2017 ahead of the implementation of mandatory ACs/air blowers.

However, among CVs, light commercial vehicle volume growth remains respectable, with wholesale estimated to grow at around 4 percent YoY, it said.

In two-wheeler space as well, the sentiment remains weak in both urban and rural markets, resulting in slower inventory correction (now at 4-8 weeks), it said, adding consequently, OEMs have raised the level of marketing activities.

Motilal Oswal expects wholesale to grow at just 1.5 percent at Hero MotoCorp, but by a respectable 12 percent at TVS Motor and 29 percent at Bajaj Auto off a low base and also helped by strong exports growth.

Hence, after considering above scenario, the research house prefers PVs over 2Ws and CVs due to their stronger volume growth and a stable competitive environment.

Its top picks in autos are Maruti Suzuki (upside seen 17 percent), Eicher Motors (12 percent) and Motherson Sumi Systems (30 percent) among large caps, and Exide Industries (18 percent) and Endurance Technologies (18 percent) among midcaps.