While rising raw material costs remain a near-term concern for margins, the broader outlook across passenger vehicles, two-wheelers, tractors, and light commercial vehicles continues to remain constructive.
Passenger vehicle segment shows strong momentum
The passenger vehicle (PV) segment is expected to remain one of the key growth drivers for the industry in FY27. According to the Society of Indian Automobile Manufacturers (SIAM), industry-wide PV growth is expected to be in the range of 5% to 7%.
Maruti Suzuki, the country’s largest carmaker, expects to outperform industry growth, with management indicating that company growth could exceed 10% in FY27.
Mahindra & Mahindra is even more optimistic on the SUV segment, where the company expects growth in the mid- to high-teens range, supported by sustained demand for utility vehicles.
Two-wheeler outlook remains healthy despite moderation concerns
In the two-wheeler segment, Hero MotoCorp expects motorcycle and scooter volumes to grow in high single digits during FY27, which is ahead of market expectations.
However, Bajaj Auto has flagged signs of moderation after a strong FY26. The company indicated that industry growth could slow to 7% to 9% in the near term after clocking nearly 20% growth in the fourth quarter.
According to the company, the moderation is largely due to a high base effect, rising raw material prices, and price hikes taken by manufacturers to offset higher input costs.
Meanwhile, TVS Motor Company and Eicher Motors also continue to benefit from steady demand trends and improving market sentiment.
Tractor and LCV demand expectations improve
On the rural and commercial vehicle front, M&M expects tractor industry growth to remain in the mid-single digits in FY27, which is stronger than earlier expectations of flat growth.
The outlook for light commercial vehicles (LCVs) also remains stable, with industry growth expected in the high single digits, broadly in line with Street estimates.
Auto stocks rally in May despite weak 2026 performance
Auto stocks have seen a recovery in May after remaining under pressure for most of 2026.
Maruti Suzuki shares are up around 4% this month, although the stock remains down nearly 17% so far this year. Hero MotoCorp has seen a similar trend.
Bajaj Auto shares have gained nearly 6% in May and are up around 13% in 2026 so far, aided by the company’s share buyback announcement.
TVS Motor Company shares have risen around 6% this month but remain marginally lower for the year, while Eicher Motors has gained around 5% in May and is broadly flat in 2026.
Valuations remain below long-term averages
Despite the recent rally, valuations across several auto companies remain below their historical averages, indicating room for further upside if volume growth sustains.
Maruti Suzuki’s FY27 estimated price-to-earnings (P/E) multiple stands at around 22 times compared with its five-year average of 34 times.
Hero MotoCorp trades at around 17 times FY27 earnings versus its historical average of 19 times.
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Bajaj Auto trades at 24 times compared with a five-year average of 24.4 times, while TVS Motor Company trades at 41 times against its historical average of 48 times.
Eicher Motors trades at around 32 times earnings versus its five-year average valuation of 36 times.
Outlook
The FY26 earnings season has reinforced optimism around the auto sector, with most companies reporting healthy operational performance and issuing stronger-than-expected FY27 guidance.
Although rising raw material costs could weigh on margins in the short term, analysts believe sustained volume growth and still-reasonable valuations could support further gains in auto stocks over the medium term.
