Auto sector faces near-term consolidation, strong growth expected in tractors and SUVs: Report

Mumbai: The Indian automobile sector is expected to experience a phase of consolidation across all segments in the near term, however, long-term growth prospects remain strong for select players, according to a recent analysis by Axis Securities.

Despite short-term challenges, the industry continues to demonstrate resilience, with specific segments showing positive momentum.

In the commercial vehicle (CV) segment, domestic dispatches witnessed a 3 per cent decline year-on-year (YoY) and 1 per cent month-on-month (MoM) in February 2025.

The market faced headwinds due to a high base effect and moderate replacement demand in the medium and heavy commercial vehicle (MHCV) truck segment.

Analysts anticipate a low single-digit decline in CV sales for FY25E, as fleet operators remain cautious about expanding capacity amid economic uncertainties.

The tractor industry, on the other hand, continues to exhibit robust growth, with domestic sales rising 27 per cent YoY in February, despite a 2 per cent MoM decline.

This growth is largely supported by strong demand from the agricultural sector, rabi sowing activities, improved water levels in reservoirs, and a favourable base effect. Given these positive factors, the tractor industry is expected to sustain its upward trajectory in the coming months.

The passenger vehicle (PV) segment posted a modest 2 per cent YoY growth in February, driven by strong performances from leading automakers.

Meanwhile, the two-wheeler (2W) market displayed mixed results, with domestic sales staying slightly positive, as key players reported varying performances across different sub-segments.

Looking ahead, the Indian auto industry is expected to benefit from several factors, including a revival in rural demand, new model launches, and the government's tax relief measures aimed at boosting consumption among the middle class.

Additionally, the implementation of OBD 2 Phase B norms from April 2025 is expected to influence industry trends, with manufacturers closely monitoring regulatory developments and consumer preferences.