The auto earnings story is starting to split into two lanes. Two-wheeler makers are converting strong demand into earnings more effectively, while passenger-vehicle companies are struggling to protect profitability despite healthy volumes.
Jefferies believes that divide could become more important for investors in the quarters ahead, with TVS Motor and Eicher Motors emerging as its preferred OEM bets.
Analysts Nitin Mangal, Sagar Sahu, Kevin Verghese and Rishi Venkateswaran said two-wheeler earnings have begun to inflect higher after a period of pressure, while four-wheelers continue to face earnings downgrades.
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Jefferies remains constructive on the sector overall, but prefers two-wheelers, with 'Buy' ratings on TVS Motor and Eicher Motors and 'Underperform' ratings on Tata Motors Passenger Vehicles (TMPV) and Hyundai Motor India.
Why Jefferies Prefers 2-Wheelers
The June quarter showed the difference clearly. Combined volumes across Jefferies' two-wheeler coverage — Bajaj Auto, Eicher Motors, Hero MotoCorp and TVS Motor — rose 26% year-on-year (YoY), while EBIT increased 39%.
Passenger vehicles delivered a different outcome. Combined volumes for Hyundai, Maruti Suzuki, Mahindra & Mahindra's auto business and Tata Motors Passenger Vehicles grew 25%, but EBIT fell 15%.
Jefferies attributed the divergence primarily to varying levels of competitive intensity across segments, with two-wheelers proving better at converting revenue growth into operating profit despite cost pressures.
Earnings Estimates Are Turning Up
The shift is now visible in Street estimates. After a mild 1% cut to FY27 EPS for two-wheelers in the June quarter, consensus estimates have risen 4% on average in the September quarter so far.
Four-wheelers have moved in the opposite direction. Following a 10% cut in June, consensus FY27 EPS estimates for four-wheelers have been cut another 6% in the September quarter so far.
Among individual names, Bajaj Auto, TVS Motor and Motherson have seen the strongest upgrades, with consensus FY27 EPS estimates rising 5-6%. Eicher Motors, Hero MotoCorp and Sona Comstar have also seen 1-3% upgrades.
At the other end, Tata Motors Passenger Vehicles has suffered the steepest September-quarter earnings cut at 16%. Maruti Suzuki, Belrise Industries and Bharat Forge have seen cuts of around 8%.
TVS, Eicher Stand Out
Jefferies' preference for two-wheelers also reflects the recent earnings trajectory. It said the broader macro concerns that weighed on autos earlier in 2026 are easing as demand remains strong and metal prices have moderated from their first-half peaks.
The brokerage believes "strong demand and peak of margin concerns" are behind the sector, although volume growth is expected to moderate from September given the high base.
That leaves TVS Motor and Eicher Motors as its preferred OEM plays.
Meanwhile, the stock-market performance has already reflected some of this divergence. Two-wheelers have generally outperformed four-wheelers, while global auto-component companies have led the broader auto pack.
Jefferies continues to like the expanding business footprint of its covered auto-component companies, although it cautioned that further multiple expansion may be limited.
For the auto sector, the message is increasingly about who can turn demand into earnings — and for Jefferies, that currently puts two-wheelers ahead of passenger vehicles.
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