India

Analysts attributed the strong outlook to improving affordability, aided by GST rate cuts, lower interest rates and adequate financing availability, alongside a steady pipeline of new product launches.

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India’s automobile sector is expected to post one of its strongest quarterly performances in recent years in Q3FY26, supported by robust demand growth and a sharp improvement in profitability across segments, as reported by ANI, citing a Nuvama Institutional Equities report.Aggregate revenue for listed auto companies under Nuvama’s coverage universe (excluding Tata Motors Passenger Vehicles) is projected to rise about 22 per cent year-on-year during the quarter, while EBITDA is expected to grow faster at around 24 per cent, indicating simultaneous benefits from volume growth, pricing and operating leverage.Analysts attributed the strong outlook to improving affordability, aided by GST rate cuts, lower interest rates and adequate financing availability, alongside a steady pipeline of new product launches. Customer sentiment has remained positive across categories, helping sustain demand momentum through the quarter.CVs, tractors emerge as key outperformers
Commercial vehicles and tractors are expected to lead the performance. Domestic commercial vehicle volumes are estimated to have grown around 21 per cent year-on-year, driven by improved transporter sentiment, better freight availability and a revival in replacement demand after several years of deferral.Tractor volumes are projected to have surged 23 per cent year-on-year, supported by state subsidies, resilient farm cash flows and healthy crop output. However, analysts cautioned that growth could moderate in FY27 due to a high base and potential subsidy rollbacks.Passenger vehicles, two-wheelers show steady recovery
The passenger vehicle segment is expected to continue expanding at a healthy pace, with domestic volumes rising nearly 20 per cent year-on-year, supported by a richer product mix and higher realisations from electrification.

In two-wheelers, a long-awaited recovery is gaining traction, with volumes estimated to have grown 16 per cent year-on-year, reflecting a rebound in mass-market demand as affordability improves.

Profitability outlook mixed across OEMs
On the margin front, companies such as TVS Motor Company, Maruti Suzuki India, Tata Motors’ commercial vehicle business, Mahindra & Mahindra and CEAT are expected to report strong EBITDA growth, benefiting from operating leverage and relatively stable currency movements.

However, Tata Motors’ consolidated performance is likely to be weighed down by a sharp decline at Jaguar Land Rover following a cyberattack, despite robust growth in its India passenger vehicle operations.

Valuations reset as momentum builds
The strong earnings outlook has prompted brokerages to raise target prices across much of the auto sector, roll forward valuation horizons to FY28 and upgrade select stocks on improved risk-reward profiles.

Analysts believe the sector’s momentum could extend beyond Q3FY26, though stock selection will remain key as growth normalises in certain pockets.