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Auto Sector Primed for Resurgence as Margins Defy Expectations
9 Sep
Summary
- GST rationalisation to drive major price cuts for consumers
- Monetary easing and Eighth Pay Commission to further support demand
- Mahindra, TVS, and Eicher gaining market share amid industry recovery
As of September 9th, 2025, the auto sector is primed for a resurgence, according to a recent report by global brokerage firm Morgan Stanley. The analysts note that, historically, auto sector valuations tend to peak around margin highs, and this time, margins are likely to surprise on the upside.
One key factor driving this trend is the impending GST rationalisation, which is expected to trigger price cuts of a scale that consumers have not witnessed before. Additionally, the implementation of the Eighth Pay Commission and ongoing monetary easing are further expected to support demand in the coming quarters.
The report also highlights that several automakers, including Mahindra & Mahindra (M&M), TVS Motor (TVSL), and Eicher Motors (EIM), are already gaining market share. The analysts believe that the GST-led price reductions could accelerate this trend, as more consumers become priced in.
On stock calls, Morgan Stanley has upgraded Eicher Motors and Hero MotoCorp to 'Equalweight', citing the potential benefits from the two-wheeler recovery. However, the brokerage has downgraded Bajaj Auto to 'Underweight', as the company is expected to benefit the least from the domestic recovery on a relative basis.
Overall, the auto sector appears poised for a stronger rebound, with the potential for significant price cuts and demand recovery in the near future.
