Auto stocks are in focus ahead of the GST Council meeting tomorrow. The stocks have been buzzing on the back of August sales. The Nifty Auto Index is up 1% in the last 5 days and the list of automobile sector stocks have been clocking steady gains over the last few weeks in anticipation of lower GST rates ahead of the festive season sale.
This is particularly a concern, as August sales indicated a mixed trend for the automobile sector. The passenger vehicle sales have shown signs of slowdown while two-wheelers and tractors offered some bright spot. According to brokerage firm Nomura, sales performances across companies were uneven, with some names outperforming estimates and others falling behind.
“Compared to our estimates, sales for TVS were 10% ahead, while Mahindra & Mahindra were slightly ahead. Hyundai, Ashok Leyland, Eicher Motors, Bajaj Auto, Tata Motors were in-line, while Maruti Suzuki’s sales was below expectation,” Nomura added.
Nomura on India Autos: Passenger vehicles face a weak month
The brokerage firm Nomura highlighted in its report that passenger vehicle volumes were muted in August. Retail data indicated that sales were up only 1% year-on-year, while wholesales were under pressure.
Furthermore, the brokerage report added, Maruti Suzuki India reported domestic sales of 131,000 units, down 8% year-on-year, falling short of Nomura’s projections.
However, exports provided some cushion, rising 41% to 36,500 units. Tata Motors also struggled on the domestic passenger vehicle front, with sales slipping 7% year-on-year to 41,000 units. On the other side, electric vehicle sales hit a new high of 8,500 units, supported by the launch of its Harrier EV.
“Dealer surveys indicate that retails were weak, but the high discounts of 100-150k on many popular models and an early festive season were supportive,” Nomura added in its report,
Nomura on India Autos: Two-wheelers – TVS shines, Bajaj slips
The two-wheeler segment on the other side offered a mixed picture. TVS Motor Company saw a sharp beat, with overall volumes at 509,000 units in August. This is a 30% jump from last year, well ahead of Nomura’s estimates.
In contrast, Bajaj Auto reported weaker domestic sales, down nearly 12% year-on-year.
“Two-wheeler OEMs increased stock in anticipation of strong festive season demand,” Nomura said, pointing out that most two-wheeler makers are betting on upcoming demand triggers.
Nomura on India Autos: Tractors surprise with strong growth
Tractor makers bucked the slowdown. They delivered strong numbers. Mahindra & Mahindra’s tractor sales rose nearly 28% year-on-year to 26,200 units, well ahead of expectations.
Escorts also posted a 26.6% jump in volumes. Furthermore, the brokerage firm noted that “while good monsoons and reservoir levels pose well for crops, the risk of above-normal monsoons in September, as warned by the IMD, may pose a risk for harvests of Kharif crops.”
The brokerage added that strong rainfall and higher sowing activity have lifted rural demand, and the upcoming GST council decision could further boost sentiment.
Nomura on India Autos: Commercial vehicles
In the medium and heavy commercial vehicle category, growth continued at a steady pace. Tata Motors reported wholesales of 13,100 units, up nearly 10% year-on-year, while Ashok Leyland recorded sales of 9,300 units, slightly above estimates. Volvo Eicher Commercial Vehicles also showed resilience with a 9.5% increase to 7,100 units.
“According to Vahan retail data, PV volumes were up 1% y-y, MHCVs were up at 9% y-y, and 2Ws were up 2% y-y in Aug-25,” Nomura highlighted.
Nomura on GST: Proposed cuts could change the game
The GST Council is scheduled to meet on September 3-4, and the outcome could have a significant impact on sales.
“As mentioned in our scenario analysis note, with potential GST cuts, there is more implied upside for the auto sector,” Nomura said. The brokerage expects GST on tractors to fall from 12% to 5%, for two-wheelers and small cars to 18% from 28%, and for large cars to 40% from 43-50%, while electric vehicles may remain at 5%.
Nomura currently forecasts 3% and 5% year-on-year volume growth for the passenger vehicle and two-wheeler industries in FY26. However, it sees a “~5-10% volume upside after the GST-cuts.”