Jefferies, the global investment banking firm, has recently published its analysis of the Indian automobile sector, shedding light on the shifting dynamics within the industry. The report highlights significant changes as traditional market leaders, Maruti Suzuki and Hyundai, face declining market shares, reaching a twelve-year low.
According to the findings from Jefferies, the combined market share of these two automobile giants has diminished to its lowest point since 2013 during the first half of the fiscal year 2025 (1HFY25). This trend indicates a noticeable transformation within the competitive automotive market, as more players, including Mahindra & Mahindra (M&M) and Toyota, are gaining traction.
Jefferies pointed out the increasing market presence of Mahindra, with its share hitting a record high of 12.5 per cent during the same period. This surge is largely fueled by the rising demand for SUVs, where Mahindra has effectively introduced various new models to capture consumer interest. The report elaborates, "Market shares of the top two OEMs (Original Equipment Manufacturers) slipping... and Mahindra and Toyota climbing to all-time highs."
While Tata Motors has also shown impressive growth, peaking at 14% at the end of the previous fiscal year, it has seen a slight reduction to 13.3% for 1HFY25. This indicates the fierce competition and consumer shift toward vehicles featuring advanced features and versatility, particularly within the SUV segment.
The second quarter of the fiscal year was challenging for the overall passenger vehicle industry, which saw wholesale volumes—encompassing exports—decline by 1% year-on-year. This challenges the sector even as it adapts to the changing tastes of consumers who are increasingly drawn toward new and feature-rich offerings.
The data from the Society of Indian Automobile Manufacturers (SIAM) underpins the shifts noted by Jefferies. Recent sales figures reveal passenger vehicle sales plummeted by 17% for the month of October. Nevertheless, the total passenger vehicle sales, which include buses and autos, reached remarkable heights, with 393,238 units sold, reflecting nearly a 0.9% increase from October 2023.
Such data signals not just the challenges within the traditional markets but also showcases the possibilities for new entrants and current players to innovate and adapt to capture more of the consumer base.
On this backdrop, Jefferies has recommended Mahindra & Mahindra stock as the preferred choice over Tata Motors and Maruti Suzuki shares. Jefferies attributes M&M's performance to its strong tractor division and the improving outlook for its automotive franchise, noting the tractor industry is on the brink of its next upcycle.
Specifically, Jefferies highlighted, "Q2 volumes grew 18% for M&M but declined 2-9% year-on-year for Maruti Suzuki India, Tata Motors, and Hyundai Motor India." This reflects the shifting tides as M&M continues to demonstrate strength and resilience even when broader market trends show decline.
Investors and analysts alike are taking note of these trends, indicating a potential pivot within the industry. With M&M's recovery plan and strategic introduction of new models aligned with market demand, many are optimistic about its future.
Overall, as competition intensifies and consumer preferences evolve, the Indian car market is experiencing a transformative moment. New entrants, equipped with innovative models and features, are changing the rules of engagement, leaving traditional manufacturers to rethink their strategies.
