The auto sector’s earnings growth in the third quarter of FY25 is projected to rise by only 3% year-on-year (YoY), marking the slowest pace in the last 11 quarters, according to a report by Motilal Oswal Financial Services.

The report noted that this modest growth comes despite the festive season, which typically drives higher sales for the automobile industry.

It said, “The Auto sector’s earnings are likely to rise 3% YoY during the quarter. The Auto OEMs are expected to deliver just around 6% YoY volume growth in 3QFY25, despite the festive season”.

The report highlighted that the two-wheeler (2W) segment, which has been a key growth driver for the auto sector in the first half of FY25, experienced a significant slowdown in Q3. In the domestic 2W sales by the four listed 2W OEMs remained flat YoY in Q3, a sharp decline from the 15% growth witnessed in the first half.

Auto Sector: What Else?

The report stated “Subdued dispatches even in festive season; demand outlook remains weak”
However, there is a silver lining as 2W exports have shown signs of recovery in key markets, including Africa.

In the commercial vehicle (CV) segment, the report said that the demand remained weak in Q3, with the top three listed original equipment manufacturers (OEMs) posting flat YoY growth in CV sales during the quarter.

On the other hand, the passenger vehicle (PV) segment saw a recovery after weak demand in the first half of FY25. The top four listed PV OEMs recorded a 10% YoY growth in PV sales in Q3, compared to flat growth in the first half.

Another positive development for the sector was the marked recovery in tractor demand. The two listed tractor OEMs posted a strong 17% YoY growth in Q3, rebounding from flat growth in the first half of the fiscal year.

As per the FADA data, in December, the last month of 2024, overall retail automobile sales declined by 12.4%, with two-wheelers (-17.6%), three-wheelers (-4.5%), PV (-1.9%) and CV (-5.2%) facing degrowth. Only tractor showed a 25.7% yearly jump in sales in December.

In the near term, FADA asserts that about 48% of the automobile dealers expect growth in January, 41.22% see flat sales and 10.69% predict a slowdown. Two-wheeler demand could benefit from improved MSP and rural liquidity, though financing and electric vehicle transition remain key challenges.

The report highlights mixed trends across segments, reflecting both challenges and recovery signals for the auto sector during Q3FY25.

(ANI Copy)

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