1 week Ago
JPMorgan is positive on the two-wheeler segment and expects it to outpace the growth of the passenger vehicle (PV) market this year. Amyn Pirani, Head of India Auto at JPMorgan pointed out that valuations for two-wheeler companies are currently fair, given that this segment was slow to grow post-COVID, resulting in lower valuations compared to other sub-sectors. However, over a longer period—whether 5, 10, or 15 years—two-wheeler growth has been in line with or even better than passenger vehicles.
He added that within the auto sector, companies gaining market share tend to see a valuation re-rating, while those losing share face a de-rating, putting the two-wheeler space in a favourable position now. In contrast, the commercial vehicle sector has reached pre-COVID levels but is experiencing stagnation. However, Pirani anticipates a positive shift as the market enters the third and fourth quarters.
He added, “We also need to remember that on commercial vehicles , OEMs have also decided to reduce discounting, focus on sustainable, profitable growth, and hence the volume growth needs to be viewed in that context.” Read Here | Rajiv Bajaj charts out the growth targets for Chetak and Freedom Regarding the passenger vehicle and four-wheeler market, Pirani remarked that demand remains robust, although the sector is currently 20-25% above pre-COVID levels. He observed a moderation in growth rates, with year-to-date trends indicating low to mid-single-digit increases.
The festive season has started off on a strong note and there is an expectation that in October and possibly the first half of November, there could be a strong growth over last year. But, Pirani said, growth rates that we saw in the last two to three years has to moderate and some other categories within autos could actually outperform. The second quarter has seen relatively stable in terms of commodity prices, which are expected to remain supportive for the remainder of the year.
This stability may lead to improved margins for auto manufacturers in the coming fiscal year. Pirani also addressed the situation in the tyre industry, noting a slight moderation in commodity prices from their peak. While price hikes are occurring, they have yet to fully align with cost reductions.
He predicted that the September quarter might face pressure, but with stable commodity prices in subsequent quarters, there could be a recovery in margins for tyre companies. Read Here | Tata Motors and ESAF Small Finance Bank join forces to boost financing for commercial vehicles.
