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What is the story about?
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 Vivek Kumar of ICICI Securities.
The brokerage expects margins to face temporary pressure as companies prioritise demand over earnings. He said, “There's an internal debate going on inside the company. People on the sales front, they are thinking about the sales, if they will pass on the prices of the market, the demand will get impacted.”
The impact of the West Asia crisis and higher raw material prices could weigh on margins for the next two to three quarters, although the situation could improve if geopolitical tensions ease.
In the two-wheeler segment, ICICI Securities continues to favour the premiumisation theme. The brokerage sees opportunities in both premium internal combustion models and electric vehicles. It believes trusted brands and a measured expansion strategy will be key to success in the electric vehicles (EV) market.
For the current year, however, exporters are expected to be better positioned to navigate uncertainties. Among two-wheeler manufacturers, Bajaj Auto has the highest export exposure, followed by TVS Motor.
Commenting on electric Tata Motors, Kumar said, "I think slow and steady wins the race." He added that brand trust remains one of the most important factors for customers in this segment.
The brokerage also remains positive on passenger vehicles, supported by lean inventories at the end of FY26 and a favourable base. Wholesale and retail trends during April and May have been encouraging, providing comfort for the first half of the year.
According to Kumar, product cycles will remain an important driver of stock performance. Mahindra & Mahindra and Tata Motors benefited from new launches in earlier years, while Mahindra & Mahindra 's recent success was driven by models such as the Thar. He noted that Hyundai could be the next company to benefit from a fresh product cycle.
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.
For the entire discussion, watch the accompanying video
The brokerage expects margins to face temporary pressure as companies prioritise demand over earnings. He said, “There's an internal debate going on inside the company. People on the sales front, they are thinking about the sales, if they will pass on the prices of the market, the demand will get impacted.”
The impact of the West Asia crisis and higher raw material prices could weigh on margins for the next two to three quarters, although the situation could improve if geopolitical tensions ease.
In the two-wheeler segment, ICICI Securities continues to favour the premiumisation theme. The brokerage sees opportunities in both premium internal combustion models and electric vehicles. It believes trusted brands and a measured expansion strategy will be key to success in the electric vehicles (EV) market.
For the current year, however, exporters are expected to be better positioned to navigate uncertainties. Among two-wheeler manufacturers, Bajaj Auto has the highest export exposure, followed by TVS Motor.
Commenting on electric Tata Motors, Kumar said, "I think slow and steady wins the race." He added that brand trust remains one of the most important factors for customers in this segment.
The brokerage also remains positive on passenger vehicles, supported by lean inventories at the end of FY26 and a favourable base. Wholesale and retail trends during April and May have been encouraging, providing comfort for the first half of the year.
According to Kumar, product cycles will remain an important driver of stock performance. Mahindra & Mahindra and Tata Motors benefited from new launches in earlier years, while Mahindra & Mahindra 's recent success was driven by models such as the Thar. He noted that Hyundai could be the next company to benefit from a fresh product cycle.
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.
For the entire discussion, watch the accompanying video
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