NewsStocksHSBC Bullish on Two-Wheeler Industry: Raises Target Prices for TVS Motor and Bajaj AutoHSBC Bullish on Two-Wheeler Industry: Raises Target Prices for TVS Motor and Bajaj Auto
HSBC expresses optimism about the Indian two-wheeler industry, projecting 6-8% CAGR over the next 3-5 years. The anticipated GST rate reduction from 28% to 18% is expected to boost affordability and demand. HSBC has raised target prices for TVS Motor to ₹3500 and Bajaj Auto to ₹9700. The industry, which grew at 2.30% CAGR from FY15-FY25, is projected to see stronger growth in FY25-FY30. The potential GST cut presents uncertainty for Eicher Motors and mixed impacts for EV manufacturers.
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HSBC, a leading global banking and financial services organization, has expressed optimism about the Indian two-wheeler industry's growth prospects, citing potential GST rate cuts as a key driver. The brokerage firm has raised target prices for major players in the sector and projects significant growth in the coming years.
Expected GST Rate Cut to Boost Affordability
HSBC anticipates that upcoming GST rate cuts will provide a substantial boost to the two-wheeler industry, projecting a growth of 6-8% CAGR over the next 3-5 years. The expected reduction in GST rates from 28% to 18% is likely to make two-wheelers more affordable, potentially reviving demand in the sector.
Price Hikes and Demand Dynamics
The two-wheeler industry has faced challenges in recent years, with prices increasing by 25-30% from 2019 to 2025. This price surge has dampened demand, particularly affecting new purchases. As a result, replacement sales now contribute to 70-75% of new sales, a significant shift from the usual 40-45% share.
HSBC's Bullish Stance on Key Players
In light of the expected industry revival, HSBC has taken a bullish stance on key players in the two-wheeler sector:
| Company | New Target Price |
|---|---|
| TVS Motor | 3500.00 |
| Bajaj Auto | 9700.00 |
HSBC maintains TVS Motor as its preferred stock in the sector.
Industry Growth Projections
HSBC's analysis reveals that the two-wheeler industry grew at a CAGR of 2.30% over FY15-FY25. Looking ahead, the brokerage projects a more robust growth rate:
- Projected CAGR for FY25-FY30: 6-8%
Impact on Different Segments
Eicher Motors
The potential GST rate cut presents high uncertainty for Eicher Motors. The stock's reaction is expected to be volatile as the market awaits the final GST decision.
EV Manufacturers
For electric vehicle (EV) manufacturers, the impact of the potential GST rate cut is mixed:
- Near-term: Possible pressure due to more competitive pricing of ICE (Internal Combustion Engine) vehicles
- Long-term: Potential benefits, as GST on EVs is unlikely to increase
Conclusion
The anticipated GST rate cut could be a game-changer for the Indian two-wheeler industry, potentially reversing the trend of sluggish demand seen in recent years. While HSBC's outlook is positive for major players like TVS Motor and Bajaj Auto, the impact varies across different segments of the industry. Investors and industry stakeholders will be keenly watching for the final GST decision and its implications on the sector's growth trajectory.
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