UBS India Research has shifted its spotlight from passenger cars to two‑wheelers and commercial vehicles after the first nine months of 2024 saw two‑wheeler sales surge 21% and passenger vehicle sales climb 24%.
Commodity price hikes are eroding margins across the auto industry, with high capital‑expenditure requirements and fierce competition driving down profitability for passenger‑vehicle makers.
Commercial vehicle makers, on the other hand, enjoy more resilient margins and robust cash flows, a trend UBS analyst Pramod Kumar highlighted as a hidden gem for investors.
Interest‑rate hikes will hit passenger‑vehicle purchases more severely as they are discretionary and often compete with other household commitments, whereas two‑wheelers and commercial vehicles are less sensitive to borrowing costs.
The festive season remains a bellwether, with last year’s October‑November period delivering 59 lakh two‑wheelers – well above the typical 40 lakh – and signalling that even a modest 2‑3% growth this year could be satisfactory.
Looking ahead, UBS expects the sector to grow 5‑7% in the next quarter, but cautions investors to stay alert for supply‑chain bottlenecks and rising input costs that could dampen earnings.