India Auto Sales Surge: Record Year, Cheaper Stocks Emerge

India's automotive industry achieved a record 34.7 million vehicle production in FY26, as reported by SIAM. Sales across passenger, two-wheeler, commercial, and three-wheeler segments all reached new highs. Demand experienced a sharp recovery in the latter half of the year, attributed to favorable economic conditions including GST reforms and reduced borrowing costs. Exports also contributed significantly, with passenger and two-wheeler exports seeing substantial year-on-year growth.

Despite the robust sales figures, the article identifies the three cheapest auto stocks based on their enterprise value-to-EBITDA ratio: Tata Motors Passenger Vehicles, Mahindra & Mahindra, and Hero MotoCorp. These companies are analyzed for their financial performance, operational challenges, and future growth prospects. Key risks for FY27 include rising input and crude oil prices, alongside geopolitical tensions.

Tata Motors Passenger Vehicles faces headwinds from its Jaguar Land Rover (JLR) division, which experienced production issues and declining revenues. However, its domestic passenger vehicle and EV businesses showed strong growth, with plans to expand production. Mahindra & Mahindra is focusing on capacity expansion for its ICE and EV segments, aiming for significant SUV volume growth and exploring international markets.

Hero MotoCorp, the world's largest two-wheeler manufacturer, reported record revenue and profit in FY26. The company is expanding into scooters, premium motorcycles, and electric vehicles, while also investing in global operations. The valuation discounts for these stocks reflect concerns ranging from JLR's performance to capacity expansion costs and EV business profitability.