The automobile sector continues to witness a clear shift towards premium products, with SUVs leading growth in the passenger vehicle market and premium motorcycles with engine capacities above 125cc outperforming entry-level models, according to CLSA. As reported by CNBC TV18, buyers have largely maintained their budgets following the GST rate cut but are increasingly opting for better-equipped and feature-rich vehicles. The entry-level segment remains subdued for most automakers, though Maruti Suzuki has shown some improvement in its mini and compact car categories with volumes increasing by around 8,000-10,000 units per month on a cumulative basis. Despite challenging macroeconomic conditions, automakers remain optimistic about demand, with original equipment manufacturers highlighting a rising share of first-time buyers along with replacement demand as key drivers supporting expectations of strong single-digit industry growth.
India's automobile sector could still post high single-digit growth in FY27, even as rising fuel prices, higher commodity costs and geopolitical uncertainties create near-term challenges, according to ICICI Securities. Vivek Kumar of ICICI Securities expects margins to face temporary pressure as companies prioritise demand over earnings. As reported by CNBC TV18, Kumar said there's an internal debate going on inside companies - people on the sales front are thinking about passing on market prices, but demand will get impacted if they do. The impact of the West Asia crisis and higher raw material prices could weigh on profitability over the next two to three quarters, although the situation could improve if geopolitical tensions ease.
Both ICICI Securities and CLSA have identified similar investment themes in the automobile sector. ICICI Securities has identified five automobile and auto ancillary companies as its top conviction ideas for June 2026, citing export momentum, premiumisation trends, capacity expansion plans, growing electric vehicle opportunities and strong order books as key drivers. The brokerage retained 'Buy' recommendations on Bajaj Auto, Eicher Motors, Maruti Suzuki India, Endurance Technologies and Minda Corporation. CLSA has reiterated its bullish stance on select automakers, identifying Mahindra & Mahindra, Tata Motors Passenger Vehicles and Bajaj Auto as preferred picks. CLSA's price targets include ₹468 on Tata Motors PV, ₹4,279 on Mahindra & Mahindra and ₹11,643 on Bajaj Auto, implying upside potential of 23%, 42% and 16% respectively. According to reports from The Financial Express, Axis Securities said improving export demand, premium product launches, capacity additions and rising content per vehicle are expected to support growth across the sector despite near-term pressures from commodity inflation and geopolitical uncertainties.
Axis Securities retained its 'Buy' recommendation on Bajaj Auto with a target price of ₹11,410, implying 12% upside. As reported by The Financial Express, the brokerage said Bajaj Auto's international business remained a key growth driver during Q4FY26, with export volumes exceeding 6,00,000 units for the second consecutive quarter. Growth was led by Latin America, which recorded its 11th consecutive quarter of expansion, while Africa showed signs of recovery and Brazil continued to scale up supported by premium positioning and capacity expansion. According to the latest reports, management remains constructive on exports, supported by geographic diversification and favourable currency tailwinds. The company's three-wheeler business crossed 5 lakh units for the first time in FY26, benefiting from rising shared mobility demand, improved rural connectivity and rapid electrification. Another significant development is Bajaj Auto Credit Limited, where assets under management expanded to about ₹19,000 crore with return on equity improving to around 23%, making the financing arm an increasingly important contributor to the broader Bajaj Auto ecosystem.
Axis Securities maintained its 'Buy' recommendation on Eicher Motors with a target price of ₹8,060, implying 15% upside. According to reports from The Financial Express, Royal Enfield's multi-phase capacity expansion programme provides long-term visibility. Existing production capacity of about 1.4 million units is expected to increase to roughly 1.6 million units by June-July 2026 through debottlenecking initiatives, while a ₹958 crore brownfield expansion in Tamil Nadu is expected to lift capacity to around 2 million units by Q2FY28. International volumes remained robust during FY26, with exports growing 20% YoY to 1.2 lakh units, led by strong momentum in Latin America and SAARC markets. The brokerage also highlighted Royal Enfield's entry into electric mobility through the Flying Flea C6 platform, with management intending to follow a calibrated rollout strategy focused on building a premium electric mobility category rather than pursuing volume-led expansion in the initial phase.
Axis Securities retained its 'Buy' recommendation on Maruti Suzuki India with a target price of ₹14,620, implying 14% upside. As reported by The Financial Express, domestic demand remained healthy in Q4FY26, helping the company achieve record total sales of 24,22,713 units. Domestic sales rose to 19,74,939 units from 19,00,604 units year-on-year, while exports increased to 4,47,774 units from 3,32,585 units during the same period. The company maintained leadership at 49% share of India's PV exports, with exports continuing to be a key driver. According to the latest reports, demand was supported by improving traction in the small-car segment and higher participation from first-time buyers, though production capacity constraints resulted in a pending order book of 1,90,000 units. Axis Securities highlighted Maruti Suzuki's electric vehicle strategy centred on the eVX platform, with capacity additions at the Gujarat facility expected to support larger production ramp-up after July, while the company continues to invest in charging infrastructure across the country.
Within the broader auto universe, ICICI Securities currently prefers passenger vehicles and two-wheelers over commercial vehicles and tractors. Given the multiple uncertainties facing the industry, the brokerage believes segments with greater visibility and demand certainty are likely to offer better opportunities over the next 12 to 18 months. CLSA notes that demand trends remain skewed towards premium products across both passenger vehicles and two-wheelers, even as broader consumption remains uneven. For the current year, exporters are expected to be better positioned to navigate uncertainties, with Bajaj Auto having the highest export exposure among two-wheeler manufacturers, followed by TVS Motor. ICICI Securities continues to favour the premiumisation theme in the two-wheeler segment, seeing opportunities in both premium internal combustion models and electric vehicles, believing trusted brands and a measured expansion strategy will be key to success in the EV market. The brokerage also remains positive on passenger vehicles, supported by lean inventories at the end of FY26 and a favourable base, with wholesale and retail trends during April and May being encouraging.
