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India’s automobile sector is seeing a notable push from rural demand, buoyed by above-average monsoon conditions and a robust rabi harvest, according to a recent report from HSBC Global Research. These factors are contributing to steady momentum in tractor sales and supporting two-wheeler demand across key rural markets.

The report highlights that a higher number of auspicious days for weddings, combined with a successful rabi season, helped sustain growth in two-wheeler sales during May. Channel checks point to continued resilience in rural consumption patterns.

In the electric vehicle space, the market is showing encouraging signs. Electric four-wheeler (e4W) penetration rose to 3.4 per cent in May. Tata Motors maintained its leadership with a 35 per cent market share, followed closely by MG at 31 per cent and Mahindra & Mahindra (M&M) at 20 per cent. Hyundai, aided by the launch of its ‘e-Creta’ model, captured 5 per cent of the segment.

Electric Two-Wheelers

Meanwhile, electric two-wheelers (e2Ws) reached 6.1 per cent market penetration, with retail sales crossing the 100,000-unit mark. TVS led the charts with 25,000 units, trailed by Bajaj at 22,000 units. Ola Electric held the third position in terms of monthly sales.

However, passenger vehicle (PV) demand remained sluggish, with little sign of near-term recovery. Despite the soft demand, original equipment manufacturers (OEMs) continued to exercise inventory control. “We expect the PV discount to stay elevated around the current level amid a weak demand outlook,” the report noted.

Maruti Suzuki posted a modest 3 per cent increase in overall volumes for May, driven by an 80 per cent jump in exports that offset a 6 per cent decline in domestic sales. M&M recorded a 21 per cent year-on-year growth in SUV wholesales, while Tata Motors saw an 11 per cent dip in PV volumes, despite a slight 2 per cent uptick in EV sales. Hyundai’s domestic sales fell 11 per cent, largely due to routine plant shutdowns.

The two-wheeler segment showed mixed trends. Bajaj Auto’s domestic sales edged up 2 per cent, while exports rose 20 per cent. TVS Motors saw a robust 16 per cent year-on-year increase in total two-wheeler volumes, with domestic and export growth at 14 per cent and 21 per cent, respectively.

Tractor sales showed divergence between manufacturers. M&M’s domestic volumes rose 10 per cent, while Escorts experienced a 2 per cent drop. In exports, M&M saw an 8 per cent decline, whereas Escorts recorded a sharp 71 per cent rise.

Commercial vehicle (CV) performance remained muted, with overall volumes down 3 per cent year-on-year. Within the segment, light commercial vehicles (LCVs) contracted by 6 per cent, while medium and heavy commercial vehicles (MHCVs) and buses each posted a modest 2 per cent growth.

"Early advancement of monsoons and above-average reservoir levels are positives going forward," the report concluded, hinting at continued support for rural and agricultural-driven auto demand.