Motilal Oswal picks 4 auto stocks riding 34% sales growth, and also a risk warning

India's automobile sector just posted another blowout month. Domestic passenger vehicle sales jumped 34% year-on-year in July 2026, while two-wheeler sales grew 17%, according to a new sector update from Motilal Oswal Financial Services. The momentum has been building since the start of the fiscal year, fueled by GST rate cuts, festive-season stocking and a strong recovery in rural demand.

In the passenger vehicle space, Maruti Suzuki (MSIL) and Tata Motors (TMPV) were the standout performers in July, growing 42% and 58% respectively. Maruti's dominance is now staggering: its market share in the car segment climbed to a record 73.2%, powered by strong growth across the Celerio, Alto, Swift, WagonR and Baleno. Meanwhile, Mahindra and Hyundai both lost ground during the month.

Utility vehicles continue to eat into traditional car sales, with UV volumes up 36% in July and now accounting for roughly 67% of the entire passenger vehicle market. Tata's Nexon and Punch remain its biggest sellers, while Maruti's new Victoris has already crossed 121,000 units sold since launch, a sign of just how quickly SUVs are reshaping what Indians choose to drive.

Among motorcycle and scooter makers, TVS Motor was the standout, posting 32% overall growth and outperforming rivals across nearly every segment, from mopeds to premium bikes. Its Raider and Apache models both saw strong gains, and TVS gained roughly 260 basis points of market share in the 2W ICE segment year-on-year.

Not every legacy player is celebrating. Bajaj Auto saw an 8% decline in overall two-wheeler volumes in July, and its market share in motorcycles fell to just 11%, the lowest it has ever recorded. The company is pinning its comeback hopes on a refreshed Pulsar lineup and new product launches planned for later this year.

Entry-level commuter bikes are losing steam as inflation and delayed monsoons squeeze budget-conscious buyers. Instead, growth is being driven by pricier machines: the 150-250cc segment grew 30% in July, and bikes above 250cc surged 45%. Royal Enfield, Triumph and TVS's Apache and Ronin models are among the biggest beneficiaries of this shift toward premiumization.

Despite broader pressure on entry-level bikes, Hero MotoCorp strengthened its grip on the crucial 100cc category, posting 21% growth and pushing its market share in that segment to an all-time high of 87%. The Splendor, its flagship model, grew a striking 35% year-on-year and remains the backbone of Hero's business.

Most Scooter sales grew a modest 8% in July, lagging behind motorcycles. But the real story is Honda's steady decline: its scooter volumes fell 12.5% for the month, and its flagship Activa and Dio models both lost ground, dragging its market share down sharply. TVS and Hero, by contrast, continued gaining share in the scooter space.

Motilal Oswal expects the strong sales momentum to continue into the festive season before tapering off later in the year as comparisons get tougher. The bigger risks on the horizon: a possible escalation in West Asia tensions and the threat of a weak monsoon, both of which could dent rural demand.
Their top picks for the road ahead are:
Among carmakers
Maruti Suzuki,
TVS
Mahindra
and Bajaj Auto among carmakers
Among auto part makers
UNO Minda,
MSWIL,
Endurance and
Samvardhana Motherson