Auto, Auto-Ancillaries Q3 Results Preview- Volume Growth Led By Strong Export, PV Sales Performance: DRChoksey

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Deven Choksey Research Report

In Q3 FY25, the auto original equipment manufacturer sector showed mixed performance across segments. PV OEMs saw strong growth during the festive season, fueled by higher demand for hatchbacks and increased discounts particularly in Maruti Suzuki India Ltd.

In contrast, the two-wheeler segment showed weakness, with flat domestic sales YoY, indicating a post-festive slowdown. Commercial vehicle demand remained subdued, as top OEMs posted flat YoY growth.

In Q3 FY25, sales volume varied across categories within our coverage. Bajaj Auto’s two-wheelers posted flat growth of 1.4% YoY, reflecting a slowdown in demand post-festive season. PV sales, however, rose by 4.7% YoY, driven by strong festive season demand, which helped recover from a weaker first half of the fiscal year. The CV segment continued to face challenges, with overall market weakness despite positive demand in the buses segment.

In our coverage, export sales demonstrated robust growth of 24.4% YoY (17.8% QoQ). This recovery in export markets supported overall sales volume for Q3 FY25, helping to offset the weaker domestic performance, which was declining by 2.3% YoY.

The near-term outlook for automobile retail remains cautiously optimistic, supported by strong rural demand and new launches expected to drive sales in 2W, PV, and CV segments. However, weak urban growth and adverse macroeconomic factors may limit further sales growth in the upcoming quarters.

For Q3 FY25E, in our OEM coverage we expect, overall revenue to grow 9.6% YoY (12.7% QoQ), leading by Maruti Suzuki which expected to grow 18.0% YoY, driven by strong demand in the PV-SUV segments, while Tata Motors is expected to grow 8.0% YoY, supported by a positive JLR outlook for H2 FY25E.

However, Ashok Leyland is likely to experience a 2.8% YoY decline due to weak medium and heavy commercial vehicle demand. After strong growth in Q2 FY25, Bajaj Auto's sales growth is expected to moderate, with a 9.7% YoY increase, driven by steady export demand in the two-wheeler and three-wheeler segments.

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