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Auto Volumes: Double-digit growth trend continues; Base effect to moderate H2 growth

ICICIdirect Research 04 Sep 2026 DISCLAIMER

Indian auto industry delivered another strong operating update in August 2026, with healthy wholesale dispatches across segments, reinforcing confidence in FY27 demand outlook.
This was corroborated by industry retail volumes growing ~16% YoY, indicating that underlying on-group demand remains healthy.
The Commercial Vehicle (CV) segment Continue to surprise positively, led by strong growth in the M&HCV truck category, aided by improving infrastructure activity, fleet replacement demand and better freight movement along with early signs of recovery in Passenger (Bus) segment.
Passenger Vehicle (PV) demand continues to remain healthy, supported by GST 2.0 tailwinds. Within the segment, Maruti Suzuki reported ~21% YoY growth, while Mahindra & Mahindra delivered an impressive ~50% YoY(on a lower base) increase in wholesale volumes. Hyundai reported 9% YoY growth wherein exports were affected by logistical constraints.
Tata Motors emerged as the standout performer, significantly outperforming industry growth with Passenger Vehicle volumes rising ~56% YoY and Commercial Vehicle volumes growing ~49% YoY, reflecting broad-based strength across its portfolio.
2-W segment maintained strong momentum, led by Bajaj Auto (+30% YoY), TVS Motors (+21% YoY)—supported by a healthy export contribution.
Going ahead we expect growth to moderate from September/October as the comparison base normalizes (given GST 2.0 tailwinds started from September last year). This is the prime reason for Auto Index correcting by ~3% over the past few days post volume numbers despite the healthy show. Recent rise in brent crude prices also dampened the investor sentiments.
The key monitorable now shifts to the upcoming festive season. Nevertheless, industry commentary remains constructive, with OEMs continuing to prepare for higher festive demand and maintaining a positive FY27 growth outlook in the range of 8-10%.
Given the consistent positive momentum, we turn incrementally positive on the CV space with our top bet as Tata Motors CV Ltd (Rating: BUY; target: ₹ 550) in the OEM space. While playing on the same theme we like Bharat Forge (Rating: BUY, target: ₹ 2,460) and ZF CV Control Systems (Rating: BUY, target: ₹ 3,170) in the auto ancillary space.

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