Auto stocks in focus: India’s automobile retail momentum remained firm in May 2026 across most segments, with passenger vehicles (PVs), two-wheelers (2Ws), light commercial vehicles (LCVs) and tractors registering healthy year-on-year growth, Morgan Stanley noted. The brokerage has reiterated its preference for Maruti Suzuki, Mahindra & Mahindra, TVS Motor and Hero MotoCorp as its top overweight picks in the sector.
“Retail sales trend in May 2026 remained healthy across PVs, 2Ws, LCVs and tractors; MHCV growth moderated during the month,” the brokerage said, highlighting the resilience in demand despite pockets of cost and supply pressures. Passenger vehicle retail sales rose 27 per cent year-on-year, while two-wheeler sales grew 11 per cent YoY in May. Tractor sales also saw robust traction, climbing 16 per cent YoY, supported by favourable rural conditions.
However, the brokerage flagged some moderation in the medium and heavy commercial vehicle (MHCV) segment, where growth slowed to 6 per cent YoY. Rising input costs and higher diesel prices are weighing on fleet operators, impacting demand in the segment.
Mahindra & Mahindra has already pointed to emerging headwinds. The company has observed “signs of short- to medium-term moderation in the MHCV industry driven by elevated input costs and higher diesel prices putting pressure on fleet operators’ profitability,” the note said. Despite this, rural demand continues to underpin tractor sales, aided by adequate reservoir levels and positive farm sentiment, although risks such as possible El Niño conditions and higher fertiliser costs remain key variables to monitor.
Electric vehicle adoption continued to strengthen across categories, with penetration levels inching higher month-on-month. Morgan Stanley noted that EV penetration in two-wheelers rose to 9.2 per cent in May, up from 7.9 per cent in April, while penetration in passenger vehicles increased to 6.4 per cent from 5.9 per cent over the same period.
Electric PV and 2W retail sales recorded sharp growth of 97 per cent and 69 per cent YoY, respectively. “EV penetration improved across segments,” the brokerage said, underlining a structural shift in consumer preferences.
In contrast, Ashok Leyland’s performance fell short of expectations, reflecting the emerging weakness in the commercial vehicles space.
The brokerage also flagged isolated supply-side disruptions as an area to watch. Mahindra & Mahindra faced production constraints due to manpower shortages at certain suppliers, which impacted output.
(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money related decisions.)
