India's Auto Market Sees Major Consumer Shift

The Indian automotive market is changing significantly, with consumer tastes moving towards premium offerings, electric vehicles, and sport utility vehicles (SUVs). This evolving demand is causing market share to shift as some companies better capture new trends. Jefferies, a prominent brokerage firm, has identified TVS Motor Company, Eicher Motors, and Mahindra & Mahindra as key beneficiaries, keeping 'Buy' ratings for all three due to their strong position and market momentum.

Why Jefferies Backs Key Indian Automakers

Jefferies' confidence in TVS Motor, Eicher Motors, and Mahindra & Mahindra comes from their ability to manage and lead structural changes in the Indian auto sector. The brokerage's 'Buy' ratings signal strong conviction that these companies are aligned with current demand trends, particularly the move away from entry-level vehicles towards higher-value products and advanced technologies like electric powertrains. This strategic alignment is expected to boost market share and profits.

As of April 2026, TVS Motor has a P/E ratio of 64.5, Eicher Motors stands at 36.10, and Mahindra & Mahindra is at 22.91. While some valuations are considered high, Jefferies suggests these multiples are justified for companies showing strong growth franchises.

Market Dynamics: SUVs Dominate, EVs Gain Traction

The Indian auto industry is undergoing a profound shift. In passenger vehicles (PVs), SUVs now make up about 67% of total PV sales in FY26, up from 65% in FY25. This surge benefits Mahindra & Mahindra, which has increased its PV market share to 14% in FY26 from 6% in FY21, using its strong SUV lineup like the Scorpio and Thar. Competitors like Maruti Suzuki, though still leading in volume, have seen their market share fall to a 13-year low of 39.26% in FY26 as demand for SUVs grows.

In the two-wheeler (2W) market, EV use is steadily growing, reaching 6.5% in FY26. TVS Motor leads this segment with a 24% share. TVS Motor's domestic 2W share reached a 22-year high of 19% in FY26. Eicher Motors, through its Royal Enfield brand, continues to lead the premium motorcycle market (125cc and above) with a 31% share, benefiting from consumers moving up from basic bikes. The overall 2W industry recorded sales of 21.4 million units in FY26, growing 13.4% year-over-year (YoY). The tractor segment also saw strong growth, exceeding 1 million units for the first time in FY26 with an 18.94% YoY increase, fueled by rural economic health and government backing. Mahindra & Mahindra, with its combined Mahindra and Swaraj brands, holds a leading 42.57% share in the tractor market.

In April 2025, TVS Motor reported 16% YoY sales growth, with a significant 59% surge in EV sales and 45% export growth. Eicher Motors saw 6% YoY growth in April 2025, driven by a 55% rise in exports and 36% growth in premium motorcycles. Mahindra & Mahindra's PV sales grew 22.2% in FY26, while its tractor segment saw a 24% increase. The broader auto sector is forecast to grow between 6-8% annually (CAGR) over FY26-28.

Potential Risks and Valuations

However, several risks and competitive pressures need consideration. MarketsMojo notes Eicher Motors' valuations are 'very expensive'. The high P/E ratios for TVS Motor (64.5) and M&M (22.91, above its median) suggest that expected growth is already reflected in the share price. Competitors like Maruti Suzuki, though still leading in volume, still hold a large market presence, and Tata Motors is a strong contender in both internal combustion engine (ICE) and EV segments. The electric two-wheeler market, though growing, is dynamic; Ola Electric has experienced a sharp sales decline in FY26, highlighting the challenges of scaling and market shifts. Stricter emission rules could challenge companies like Mahindra & Mahindra. Furthermore, focus on specific segments, such as premium bikes for Eicher or SUVs for M&M, could create concentrated risks if demand in those areas slows or competition increases.

Future Growth Projections

Jefferies forecasts the Indian auto sector will grow by 6-8% annually (CAGR) through FY28. The sector's future growth is expected to be driven by ongoing premiumization, increasing EV use, and steady SUV demand. Analysts expect steady growth in passenger vehicles, with utility vehicles outperforming. Two-wheeler momentum is mixed, with mid-tier segments rebounding while entry-level models face price pressure. The electric two-wheeler segment is set for further growth, provided supply challenges are overcome.