Stories
JPMorgan: India Auto Sector to See High Single-Digit Growth, Margins to Recover H2
- •JPMorgan predicts India's auto sector will maintain high single-digit growth for several years, despite moderating from last year's strong base.
- •Recent GST rate cuts have boosted vehicle affordability, supporting demand beyond immediate recovery.
- •Rising commodity prices, especially steel, are pressuring margins in the near term, with Q1 being weak and Q2 likely to continue the trend.
- •JPMorgan expects margins to significantly improve in H2 as price hikes catch up across segments, assuming commodity prices stabilize.
- •New model launches will drive passenger vehicle growth, and EV penetration in two-wheelers is projected to hit 20% by decade-end.
Key Questions Answered
The Indian automobile sector is expected to sustain high single-digit growth across categories over the next few years, though margins are likely to remain under pressure in the near term due to rising commodity prices like steel. However, assuming commodities settle, price hikes are expected to catch up by the second half, leading to significantly better sequential margins.
Commercial vehicles and two-wheelers have been relatively quick to pass on higher input costs through price increases. Passenger vehicle makers have been slower to raise prices, but price hikes are now catching up across segments.
Electric vehicle penetration in new two-wheeler sales is currently approaching 10%, though the pace of adoption is somewhat limited by manufacturer capacity constraints. JPMorgan expects two-wheeler EV penetration to reach approximately 20% by the end of the decade.
