Nomura Identifies M&M, Hyundai, and Ather Energy as Top Auto Picks Following Strong June Sales, Predicts EV Market Inflection Point.
Recent data reveals a significant upswing in India’s automotive sector, particularly within the electric vehicle (EV) segment, which is now at a critical inflection point according to analysis from Nomura. The June sales figures indicate robust consumer interest, with passenger vehicle sales reaching approximately 4.11 lakh units, marking a remarkable year-on-year increase of 28.63%. The overall automotive market exhibited a solid growth trajectory with total retail sales of 25,57,234 units, translating to a 21.83% growth, underscored by notable performance across various categories including medium to heavy commercial vehicles, two-wheelers, and tractors.
Nomura highlighted a significant rise in EV penetration, which has now reached 7.5% for passenger vehicles and 10.6% for two-wheelers, driven by new product launches and advancements in charging infrastructure. The brokerage has recommended investors target companies positioned to capitalize on this EV trend, specifically naming Mahindra & Mahindra, Hyundai India, Ather Energy, and Sona BLW Precision Forgings as preferred picks. The easing of geopolitical tensions and a decrease in commodity prices are expected to further stabilize the cost structures for original equipment manufacturers (OEMs), although pressures on margins are anticipated to persist through the first quarter of FY27.
Despite some concerns regarding the potential impact of El Niño on future agricultural machinery demand, tractor volumes were reported above estimates, reflecting continued resilience in the agricultural segment. Nomura noted that while input cost pressures across different vehicle categories have moderated—approximately 2.3% for passenger vehicles and 3.4% for two-wheelers—companies reliant on internal combustion engine (ICE) technologies lacking a strong EV strategy may face risks of de-rating in the coming period. This serves as a pivotal moment for investors to reassess their portfolios in light of shifting market dynamics.
Nomura has maintained a ‘Buy’ rating for its top auto selections, including Mahindra & Mahindra and Hyundai, with target prices suggesting considerable upside potential—Rs 4,580 for M&M, representing a 46% potential increase, and Rs 2,407 for Hyundai, indicating a 21% upside. Conversely, it has assigned ‘Neutral’ ratings to firms such as Maruti Suzuki and Hero MotoCorp, signaling a differentiated outlook within the fast-evolving automotive landscape. These trends provide strategic opportunities for Wealthova investors aiming to align with the burgeoning EV market in India.
Source: The Economic Times
(Expert Note: This report was prepared by the Wealthova team.)