Shares of automobile companies came under heavy selling pressure on Thursday, with the Nifty Auto index plunging more than 3% intraday to emerge as the biggest loser among sectoral indices. Weak September sales numbers from key automakers weighed on sentiment, while the government’s new fuel-efficiency norms for passenger vehicles added another major development for the sector.
Bajaj Auto was the biggest decliner among the major auto stocks, falling 8%. Hero MotoCorp, Mahindra & Mahindra (M&M) and Eicher Motors declined around 4% each. Bosch, Ashok Leyland, Tata Motors Commercial Vehicles and TVS Motor Company also fell around 3% each.
Among auto ancillaries, Uno Minda, Samvardhana Motherson International and Bharat Forge were down around 3%. Maruti Suzuki and Tata Motors PV slipped around 2% each, while tyre makers Apollo Tyres and MRF also shed around 2%.
Weak auto sales
Bajaj Auto reported a 5% year-on-year increase in total sales to 538,443 units in September 2026, although the figure was below Street expectations. Exports provided the key support, jumping 32% year-on-year to 243,987 units from 185,252 units a year earlier.
However, domestic sales declined 9% to 294,456 units from 325,252 units in September 2025.
M&M reported total auto sales of 114,874 vehicles for September, representing 15% growth including exports. Its tractor sales, however, dropped 21% to 52,100 units from 66,111 units in the year-ago month.
M&M attributed the decline in tractor volumes to a shift in the festive season, which begins in October this year compared with September last year. The company also pointed to a higher base in September 2025, when volumes had benefited from the implementation of the GST rate cut. M&M’s exports stood at 1,892 units, up 62% year-on-year.
September sales data from Maruti Suzuki, Tata Motors, Ashok Leyland and Hero MotoCorp were not available yet.
New CAFE norms tighten fuel-efficiency targets
Adding another development to the sector, the Ministry of Power notified India’s third phase of Corporate Average Fuel Economy (CAFE) norms for passenger vehicles for 2027-28 to 2031-32. The new rules will take effect from April 1, 2027.
Under the framework, the fleet average fuel-consumption benchmark will be tightened from 3.996 litres per 100 km in 2027-28 to 3.3273 litres per 100 km in 2031-32. This represents a 16.7% improvement in fuel efficiency over the five-year period.
The reference vehicle weight has also been increased from 1,082 kg to 1,229 kg. Automakers will have multiple routes to meet the requirements, with ethanol-blended petrol, biofuels and compressed biogas (CBG) recognised through a Carbon Neutrality Factor.
Battery electric vehicles (BEVs), range-extended EVs, plug-in hybrids, strong hybrids and flexfuel vehicles will also receive “super credits” under the framework.
What’s next for the sector?
Brokerage firm Emkay Global remains constructive on the auto sector after an expert interaction with a large multi-brand dealer operating across Mumbai and Pune. The discussion pointed to a broad-based recovery in demand across commercial vehicles (CVs), passenger vehicles (PVs) and two-wheelers, with the dealer noting that such widespread growth has not been seen in more than a decade.
Emkay expects the festive period to sustain this momentum, with Navratri and Dussehra falling in October, followed by Diwali in November. The brokerage believes the current upcycle could have structural support from longer replacement cycles and easing GST-related pressures, despite a high base.
Emkay’s preferred CV picks are Tata Motors CV and Ashok Leyland, while TVS Motor Company and Ather are its choices in two-wheelers. In passenger vehicles, it prefers Hyundai Motor India and Mahindra & Mahindra. Among auto ancillaries, its preferred names are Pricol, Sandhar, Craftsman Automation and JK Tyre.
Meanwhile, JM Financial expects dealers to build inventory ahead of the festive season, potentially supporting wholesale volumes and helping growth rates normalise against a high base.
Within two-wheelers, JM Financial prefers TVS Motor Company, citing continued market-share gains. Maruti Suzuki India remains its preferred PV pick, supported by its launch pipeline, recovery in the entry-level segment, lean inventory and ramp-up of two new facilities. Mahindra & Mahindra, meanwhile, is positioned to benefit from continued premiumisation in the passenger vehicle market, according to the brokerage.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
