Jefferies sees strong growth for 2-wheelers, tractors in 2025; prefers M&M, Eicher, TVS

Jefferies picked M&M, Eicher Motors, and TVS as preferred buys

After the Indian auto sector exhibited better-than-expected December 2024 sales figures, analysts at Jefferies expect 2025 to show divergence across auto segments. Jefferies pegs two-wheelers and tractors to outpace passenger vehicle (PV) and truck growth over the next few years.

Over FY25-27, Jefferies forecasted 2W and tractor volumes to grow between 13-15 percent compounded annual growth rate (CAGR), outpacing 5-8 percent forecast for PVs and trucks during the same time period. This, therefore, showcased shift in the auto market landscape, where traditional sectors like 2Ws and tractors are set for a stronger growth, supported by good affordability and improved accessibilty.

Jefferies picked M&M, Eicher Motors, and TVS as preferred buys and shared target prices at Rs 4,075, Rs 6,600 per share, and Rs 3,050, respectively. Analysts believe that M&M is gaining market share across tractors, PVs and light commercial vehicles (LCVs). TVS Motor, too, has gained in both domestic and export 2Ws in the recent years.

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Eicher Motors, which has a strong presence in the premium motorcycle segment, is expected to benefit from continued demand for high-performance two-wheelers in both domestic and international markets. The company is forecast to see a 16% earnings growth through FY24-27.

On the other hand, Jefferies has lowered target prices for Bajaj Auto and Hero MotoCorp to Rs 10,350 and Rs 4,900 per share, respectively, though it has maintained "buy" ratings for both companies.

Meanwhile, the adoption of electric vehicles (EVs) in India's automotive sector has been slower than anticipated. The share of electric two-wheelers in total sales has remained stagnant between 4-7 percent over the past two years. Jefferies expects the share of electric two-wheelers to gradually rise to 6 percent by FY25, 8 percent by FY26, and 10 percent by FY27.

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