India’s auto sector is seeing strong volume growth this quarter, driven by pre-festive stocking and better demand across segments, according to a recent sector report.
Volume Growth Across Segments
Passenger vehicles (PVs) recorded 31.2 per cent growth year-on-year in 2QFY27, while commercial vehicles (CVs) grew by approximately 29 per cent. Two-wheelers, which include internal combustion engine (ICE) models, posted a more modest 10.4 per cent increase. The report notes that this strong headline growth is partly due to a low base, as manufacturers delayed dispatches in September 2025 ahead of GST rate cuts.
Within the two-wheeler segment, scooters are outperforming motorcycles as consumers shift toward premium options. ICE scooters grew 15.4 per cent year-on-year, while motorcycles only managed 7.4 per cent. The 150–250cc premium motorcycle segment was a key driver, growing 21.2 per cent.
Passenger vehicle demand remains healthy, led by utility vehicles (UVs). These grew 34.1 per cent year-on-year, compared to about 25 per cent for passenger cars. Utility vehicles now account for 67.6 per cent of PV volumes in the first half of FY27, reflecting a sustained preference for larger vehicles. Maruti Suzuki, Tata Motors Passenger Vehicles, and Kia posted strong growth during this period, while Mahindra & Mahindra and Hyundai faced some pressure from supply constraints.
Commercial vehicles also delivered a strong performance, with domestic volumes increasing 28.7 per cent year-on-year. This growth is supported by freight activity, government infrastructure spending, mining activity, and a pickup in construction demand. Medium and heavy commercial goods vehicles were a key growth driver, while light commercial vehicles benefited from demand from e-commerce and last-mile mobility.
Company-Specific Performance
TVS Motor and Eicher Motors outperformed their peers in the first half of FY27. TVS Motor continues to strengthen its market position through consistent share gains in domestic and export markets. Exports grew 35 per cent, helping to improve the company’s average selling prices.
Bajaj Auto posted 20 per cent volume growth in 2QFY27, led by a 41 per cent surge in exports. The export mix increased to 50 per cent from 43 per cent in the previous year. However, domestic motorcycle volumes remain under pressure due to weakness in the economy segment and shifting consumer preferences.
TVS Motor’s expanding presence in premium motorcycles and electric two-wheelers, alongside capacity expansion, provides further growth opportunities. The brokerage maintains a target price of ₹4,817 for the stock.
Bajaj Auto is well positioned for medium-term growth, supported by healthy export momentum and a strong product launch pipeline across premium motorcycles and electric two-wheelers and three-wheelers. The brokerage maintains a target price of ₹12,162.
Profitability and Market Outlook
Commodity costs continue to pose a challenge for manufacturers. However, price increases by OEMs are expected to cushion this impact. This strategy should support a gradual recovery in margins beyond the second quarter of fiscal 2027. A strong pipeline of products and premiumization trends will also benefit companies with solid brand positioning. Manufacturers with broad portfolios are likely to see improved operating leverage. We remain constructive on the sector, while expecting volume growth to moderate from the raised levels seen in 1HFY27.
