car stocks: photovoltaic cars or 2-wheelers? How to play the upcoming rally in the automotive sector

NEW DELHI: At a time when the market was booming, the automotive sector frowned. And now that the market is in turmoil, power seems to have returned to car counters, backed by strong volumes and hopes for the benefits of goods after the government took steps to reduce steel prices.

IN Exquisite the car index is trading steadily, with a positive deviation, based on the beginning of the year (since the beginning of the year) against a 13% decline in the reference Nifty50.

Cars are a good trade that is evolving especially in terms of volume recovery, said Vikas Kemani, founder of Carnelian Capital Advisors. “We know that due to the shortage of semiconductor chips, demand and growth are stifled, but 2023 could be a very good year from this point of view,” Kemani added.

The car index has been weaker on the market over the last four years. Even now, problems with semiconductors and the supply chain continue, but demand for cars remains strong, with a waiting period of three months to two years.

Industry experts suggest that a healthy reservation and a single-digit cancellation show that demand may remain unchanged even when normal supply resumes in the coming months. This optimism is reflected in the movement of the share price of the leaders auto promotions.


and rose 2-11% in one month against a 6% drop in Nifty50. and although the red trade was slightly higher.

“After many years of low performance, we see that car stocks are returning quite strongly. At this point, they are in a blue sky scenario. We saw a clear change in their condition. With higher volumes and thus the latest government move to reduce steel prices, the high pressure on their operating profit margins will decrease. Car stocks are likely to take the lead in the next few months and quarters, “Dipan Mehta, director, Elixir Equities, told ET NOW.

Where to bet: PVs, CVs, 2Ws?
While the overall estimates of the automotive sector seem profitable, analysts are leaning towards consumer-oriented stocks, especially in the four-wheeled segment. Consensus remains weak for two-wheelers.

Heman Gianni from

expects demand to improve for passenger cars (PV) amid easing supply chain problems. However, he sees a slow recovery in 2-wheel drive (2Ws).

Data show that retail sales of passenger vehicles increased last month, but sales of two-wheelers and commercial vehicles remain low compared to the month before Covid in May 2019, according to the Federation of Car Dealers of the Association of Car Dealers (FADA).

“While AP and tractors have continued to move positively … sales of two-wheelers, three-wheelers and CVs are still not showing any signs of healthy speeds, “said FADA President Vinkesh Gulati in a statement.

Intense competition and the kind of interference that can come from electric cars do not make me optimistic about Bajaj Auto, Hero MotoCorp and

said Dipan Mehta. Companies like Tata Motors, Mahindra & Mahindra remain his best choices.

on the contrary,

Research believes that there is excessive pessimism in the case of 2Ws and some overconfidence in PVs and CVs, which is reflected in the estimates.

“Therefore, we prefer 2Ws in the car package and have a” BUY “of the three shares in our coverage – Bajaj Auto,

and Hero MotoCorp, ”it says.

Headwinds to automotive history
While the demand scenario is in favor of car stocks, the tightening of liquidity and the slowdown in economic activity during the quarter may be depressing.

“If interest rates on car loans increase by 1.5-2%, then the margin will affect demand to some extent, as most of the four-wheelers are financed and this is the only challenge that some of these companies will face.” , an independent market, said expert Sandip Sabharwal.

(Disclaimer: Recommendations, suggestions, views and opinions given by experts are their own. They do not represent the views of the Economic Times)

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