India's automobile sector demonstrated strong performance in FY26, with the country producing 34.7 million vehicles according to the Society of Indian Automobile Manufacturers (SIAM). Passenger vehicle sales rose 7.9% to 4.64 million units, while two-wheeler sales increased 10.7% to 21.7 million units. Commercial vehicle and three-wheeler sales grew 12.6% and 12.8% respectively. The year began slowly but demand improved sharply in the second half, attributed to GST reforms, income-tax relief, and lower borrowing costs following repo rate cuts. Passenger vehicle exports grew 17.5%, while two-wheeler exports increased 23.4%.
The analysis focused on companies with market capitalisation exceeding ₹500 crore and excluded dealerships. Only original equipment manufacturers (OEMs) were considered, with companies having negative EV/EBITDA ratios removed from the selection process. The final list included five stocks with the lowest EV/EBITDA ratios, with the three cheapest auto stocks identified as Tata Motors Passenger Vehicles, Mahindra & Mahindra, and Hero MotoCorp.
Tata Motors Passenger Vehicles trades at an EV/EBITDA ratio of 6.9x, significantly below the peer median of 16x. The company reported revenue growth of -8.3% to ₹3,35,582 crore in FY26, while net profit surged 196% to ₹82,390 crore, though this included a one-time demerger gain. The domestic business performed well with record sales of 6.42 lakh units, representing over 15% growth and nearly twice the industry expansion rate. Electric vehicle sales increased 43% to 92,000 units, maintaining a 40%+ market share.
Mahindra & Mahindra reported revenue growth of 25% to ₹1,98,639 crore in FY26, with net profit increasing 35% to ₹17,099 crore. The automobile business remained a key growth driver with 19% volume growth and 33% profit growth, while the company achieved a 25.3% share of the domestic SUV market by revenue. Electric vehicle penetration reached 9.6% for FY26, with the segment becoming profitable at the operating level, reporting full-year PBIT of ₹287 crore.
Hero MotoCorp achieved its highest-ever revenue and profit in FY26, with revenue growing 15% to ₹46,830 crore and net profit rising 14% to ₹5,268 crore. The company reported EBITDA margin expansion of 90 basis points to 17% in its internal combustion engine business, while scooter volumes increased 48% in Q4 and electric scooter volumes grew 2.5 times. The company plans to invest over ₹1,500 crore in FY27 for capacity expansion, including increasing monthly EV capacity from 15,000 to 25,000 units.
