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Robust volumes for June 2026 along with RM price correction supports Auto Index Outperformance

ICICIdirect Research 03 Jul 2026 DISCLAIMER

Indian auto industry delivered another strong operating update in June 2026, with healthy wholesale dispatches across most segments, reinforcing confidence in FY27 demand outlook.
Volumes remained robust, with most OEMs reporting double-digit YoY growth.
The Commercial Vehicle (CV) segment delivered the biggest positive surprise, led by strong growth in the M&HCV category, aided by improving infrastructure activity & fleet replacement demand.
Passenger Vehicle (PV) demand continued to remain healthy. Within the segment, Maruti Suzuki reported ~19% YoY growth, while Mahindra & Mahindra delivered an impressive ~28% YoY increase.
Tata Motors emerged as the standout performer, significantly outperforming industry growth with Passenger Vehicle volumes rising ~69% YoY and Commercial Vehicle volumes growing ~35% YoY, reflecting broad-based strength across its portfolio.
2-W segment maintained strong momentum, led by TVS Motor (+47% YoY), Bajaj Auto (+31% YoY)—supported by a healthy export recovery—and Eicher Motors (Royal Enfield) (+27% YoY).
Rural demand also remained resilient, with the tractor industry reporting healthy growth. Mahindra & Mahindra posted ~12% YoY growth, while Escorts Kubota delivered ~19% YoY

Commodity Tailwinds Turning Incrementally Positive

  • Commodity prices have started cooling favorably after remaining elevated in the past few months.
  • Aluminium, an important input owing to vehicle lightweighting, has corrected ~18% from its recent peak and is currently trading around US$3,100/tonne.Lead prices have declined ~9% to approximately US$1,825/tonne, while Natural Rubber has eased from around ₹275/kg to ₹270/kg.
  • The moderation in raw material costs is expected to ease margin pressures, providing room for maintaining earnings.

Investment View

  • Reflecting these improving variables, the Nifty Auto Index has outperformed the broader market, gaining ~13.5% during the recent market recovery, comfortably ahead of the Nifty 50.
  • Out top bets in the space are Exide Industries (Rating: BUY; Target: 480) and ZF Commercial Vehicle Control Systems (Rating: BUY; Target: 3,170)

Exide Industries (EIL) is the market leader in duopolistic organized Indian lead acid battery. It also has dual presence in Li-On battery space through assembly operations (1.5 GWh, Nexcharge) & Li-On Cell manufacturing venture (12 GWh, Exide Energy Sols). With nearly ₹4,800 crore already invested and commercial sampling beginning, the lithium-ion project is moving from the investment phase to near term commissioning. We see this as long term structurally positive for EIL amid debt free b/s and healthy core RoIC at its base business.  

ZF Commercial Vehicle Control Systems (ZFCV) commands strong leadership in supplying brake solutions to the M&HCV space with regulatory safety led persistent content per vehicle increase. With government regulations mandating advanced safety technologies including ESC, and broader ADAS systems for CV’s > 6 tons from October 2027, we see this as a big positive for ZF CV as it can potentially double (~2x) its content per vehicle. ZF CV offers a high-quality play on India’s CV technology upgrade cycle. We bake in 15% sales & 18% PAT CAGR over FY26-28E.

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