Motilal Oswal selected this auto stock for Budget week; the target price will tempt you; this is how much you'll earn.

News Topical, Digital Desk : Brokerage firm Motilal Oswal said in its report that India's automobile sector remained in a strong position in the last quarter of the year, marked by a broad recovery in demand and disciplined channel inventory management. After a strong performance in the third quarter due to the festivals, this momentum continued in the post-festive months, helped by supportive policy actions such as the simplification of the Goods and Services Tax and improved consumer sentiment. Unlike previous cycles, where growth was uneven or driven by inventory, the current phase is witnessing strong retail sales and low dealer inventories across most segments, creating a favorable environment for continued wholesale sales.

Passenger Vehicles

According to Motilal Oswal, passenger vehicles are benefiting from festive demand and a strong product cycle. While retail growth has moderated slightly in some areas, channel inventories at original equipment manufacturers remain low, forcing dealer networks to make frequent dispatches to replenish stocks.
Utility vehicles remain the backbone of this segment, now accounting for nearly two-thirds of total passenger vehicle sales. Small cars are also seeing a gradual recovery, supported by improved affordability and renewed interest from first-time buyers, thereby balancing the overall passenger vehicle mix.

two-wheeler

Two-wheelers are emerging as the main driver of growth in the current cycle, driven by a low base, easing inflationary pressures and a clear improvement in rural demand conditions. Retail momentum remains strong in both urban and semi-urban markets, supported by the onset of the wedding season and improved financing availability.
Scooters continue to outperform motorcycles, while premium and mid-capacity motorcycle categories have recorded strong growth.

Commercial vehicles and tractors

The commercial vehicle and tractor sectors are powering this cycle's upturn. Freight availability, infrastructure work, and replacement demand have supported continued growth in medium and heavy commercial vehicles.
Additionally, tractors have benefited from a normal monsoon, good crop patterns, and supportive minimum support prices, which have strengthened rural purchasing power. Reductions in indirect tax rates on tractors and components have further enhanced affordability, maintaining momentum in the current quarter.

Outlook for the Automobile Sector

According to Motilal Oswal, the automobile sector appears well-positioned for a stable growth phase. Low inventory provides scope for continued wholesale growth, while a gradual decline in discounts points to improved pricing discipline.
Demand drivers are increasingly divergent, including urban premium consumption, rural recovery, and infrastructure-led freight mobility. With policy support, a favorable demand environment, and improved channel structure, the sector is entering a phase where volume growth, improved mix, and operating leverage can progress simultaneously. This synergy puts the automobile industry in a strong position as it transitions from the recovery phase to more sustainable growth.

Maruti Suzuki buying advice

The brokerage firm has a buy recommendation on Maruti Suzuki, whose stock closed at ₹14,601.55 on Friday, with a target price of ₹18,197. This suggests a return of approximately 25% from the current price. Motilal Oswal stated that Maruti Suzuki's investment case is based on its strong domestic market position, improving demand, and a robust pipeline of new launches, which should lead to market share recovery and earnings growth in the medium term.
The recent GST rate cut has significantly reduced entry- and mid-segment vehicle prices, leading to a sharp improvement in demand and low dealer inventories, while exports offer continued growth opportunities.
Margins may remain sensitive to cost pressures in the short term, but a continued recovery in earnings from new model launches, capacity expansion, and exports is expected to support a positive medium-term outlook for the stock.

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