Shares of Indian automobile companies have been on a strong upward trajectory, with key indices like Nifty Auto and BSE Auto climbing over 2% on December 27, 2024. Analysts attribute this rally to optimism surrounding continued growth in the auto sector, fueled by improving rural sentiments and rising government expenditure on infrastructure. The increased demand for personal transport options is expected to boost vehicle sales, providing a strong tailwind for the sector.
Rally in Auto Stocks: Key Players Lead the Charge
Among the biggest gainers, stocks like Escorts Kubota, Bajaj Auto, Tata Motors, Eicher Motors, and Mahindra & Mahindra (M&M) are all showing impressive growth, up between 3% and 5% in intra-day trading. Other notable companies such as Samvardhana Motherson International, Maruti Suzuki India, Bharat Forge, TVS Motor Company, Ashok Leyland, Hero MotoCorp, and Exide Industries have also seen their share prices rise by 1% to 2%.
Escorts Kubota Shows Strong Rebound
Escorts Kubota, which had seen a significant 29% correction from its 52-week high of ₹4,422 in September 2024, has bounced back with a 5% surge to ₹3,302 per share. The company, primarily known for its tractors, had been underperforming due to weak tractor volumes. However, there is renewed optimism for the industry as the management expects a continuation of mid-single-digit growth in the domestic tractor market for FY25, supported by favorable conditions like above-average rainfall, anticipated higher crop yields, and improved terms of trade. With strong demand expected for the rest of FY25, the outlook for Escorts Kubota appears positive.
Tata Motors’ Punch to Become India’s Top-Selling Car in 2024
Tata Motors, another key player in the sector, saw its stock climb 3% to ₹766.75, driven by the impressive sales performance of its Punch model. With around 186,958 units sold from January to November 2024, the Punch is on track to become the top-selling car in India for 2024, surpassing well-established names like Maruti Suzuki’s Swift and Hyundai’s Creta. Tata Motors’ success with the Punch highlights its growing popularity among first-time buyers and small families, with its strong safety ratings and a variety of powertrain options, including petrol, CNG, and electric variants.
This performance underscores Tata Motors’ position as the third-largest player in the Indian passenger vehicle (PV) market, with a 13-14% market share. Analysts believe 2025 will be a strong year for Tata Motors, with new electric vehicle (EV) launches in the pipeline.
Positive Outlook for the Sector Amidst Ongoing Challenges
Despite some setbacks, including a correction in stock prices, experts believe that Tata Motors is positioned for long-term growth. With the semiconductor chip supply issue improving and global vehicle production expected to face fewer headwinds, the outlook for the auto sector remains positive. Tata Motors is also focusing on reducing automotive debt and improving profitability in its Indian operations, which should further strengthen its position in the market.
In addition to the strong performance in the passenger vehicle segment, the commercial vehicle (CV) market is also witnessing growth. As per brokerage firm Mirae Asset Sharekhan, the CV segment is in a cyclical uptick phase, and the PV market is undergoing a structural growth phase, further supporting the overall bullish sentiment surrounding the sector.
With the government continuing to invest in infrastructure and rural sentiment improving, the auto sector’s growth momentum looks set to continue into 2025, with leading automakers poised to capitalize on this trend.
