Motilal Oswal Picks TVS Motor, Bajaj Auto as Top Auto Stocks

Auto Demand Holds Up, but the Next Phase Will Test Product Strength

Motilal Oswal sees continued support from launches and premium models, even as unusually strong volume growth begins to ease.

Strong volumes come with a tougher comparison ahead

The industry’s 2QFY27 growth was broad-based: passenger vehicles rose 31.2% year on year, commercial vehicles about 29%, and internal-combustion-engine two-wheelers 10.4%. The brokerage cautions that these headline gains partly reflect a low base. Automakers had deferred dispatches in September 2025 ahead of GST rate cuts, and the comparison is expected to normalise over coming quarters.

That distinction matters for investors: volume growth may remain positive without matching the elevated rates seen in the first half of FY27. Product launches, premiumisation and operating leverage could support manufacturers, but the report’s outlook is constructive rather than unconditional. It identifies a possible El Niño impact on rural demand, geopolitical tensions in West Asia and elevated fuel and commodity costs as risks to monitor.

Different vehicle segments are showing different demand signals

In two-wheelers, scooters grew 15.4% in 2QFY27, outpacing motorcycles at 7.4%. Premium motorcycles in the 150–250cc range grew 21.2%, while weakness in economy motorcycles weighed on the broader category. The contrast points to the importance of product mix: manufacturers positioned in faster-growing or higher-value segments may be better placed than those more exposed to subdued entry-level demand.

Utility vehicles also led passenger-vehicle demand, growing 34.1% against about 25% for passenger cars. They represented 67.6% of passenger-vehicle volumes in 1HFY27, up roughly 160 basis points year on year. Commercial vehicles benefited from freight activity, infrastructure spending, mining and construction demand, though macroeconomic uncertainty and input costs remain relevant. Motilal Oswal’s preferred OEMs are Mahindra & Mahindra, Maruti Suzuki and TVS Motor; its ancillary preferences include Motherson Wiring, Samvardhana Motherson International, Steel Strips Wheels and Tenneco India.

TVS has broad momentum; Bajaj relies more on exports

TVS Motor recorded 27% year-on-year volume growth in 2QFY27, with gains across motorcycles, scooters and three-wheelers; exports rose 35%. Motilal Oswal cites its product portfolio, premium positioning and launch pipeline as supports for growth. It forecasts revenue, EBITDA and profit after tax compound annual growth of 20%, 23% and 24%, respectively, over FY26–28E, and gives the stock a target price of ₹4,817.

Bajaj Auto’s total volumes increased 20%, led by 41% export growth. Exports reached 50% of its mix, compared with 43% in 2QFY26, helping realisations and product mix. But domestic motorcycle volumes remain pressured by economy-segment weakness and market-share losses. The brokerage sees launches and planned capacity expansion across electric two- and three-wheelers as potential growth supports. Its FY26–28E revenue, EBITDA and profit-after-tax growth estimates are 20%, 22% and 22%, with a target price of ₹12,162. These are brokerage estimates and targets, not assured outcomes.

Key Highlights

• Auto growth in 2QFY27 was strong, but a low-base effect is expected to fade.
• Scooters, premium motorcycles and utility vehicles outpaced their respective broader segments.
• TVS Motor’s growth was supported by domestic volumes and exports; Motilal Oswal’s target price is ₹4,817.
• Bajaj Auto’s export mix strengthened, while domestic motorcycle demand remains a key watchpoint.
• Commodity costs, rural demand and geopolitical risks could affect the sector outlook.

Investor Note: The brokerage’s preferred stocks reflect its assessment of growth drivers and execution prospects, but investors should weigh its forecasts and target prices against normalising industry growth, company-specific risks and their own investment horizon.