BofA SEC gives 5 big triggers for the growth of auto sector, gives thumbs up to Maruti and Bajaj Auto
India’s automobile sector is once again gaining momentum. Recently, Bank of America Securities (BofA SEC) has identified 5 major triggers of potential growth in the auto sector, which point to the industry taking it to new heights. Maruti Suzuki and Bajaj Auto have been given particularly positive ratings in these analyses.
Let us know what are these 5 big triggers and what impact they can have on the auto sector.
strong demand recovery
BofA SEC says that demand recovery in the auto sector is happening rapidly. Improvement in consumer sentiment has been seen in urban and rural markets. Since the pandemic, demand for private vehicles among consumers has increased, which is a big positive sign for the automobile industry.
Companies like Maruti Suzuki, which manufacture affordable and reliable vehicles, are all set to take advantage of this growing demand.
Growing craze for electric vehicles
Electric Vehicles (EV) are becoming increasingly popular in the Indian market. According to BofA SEC, this is the second major driver of sector growth. Schemes like EV subsidy and FAME-II of the Government of India have given impetus to this sector.
Bajaj Auto, which is in the news for its electric scooter “Chetak”, is making a strong hold in this segment.
Commodity price stability
Stability in production costs is extremely important for the automobile industry. BofA SEC believes that margins of automobile companies may improve due to stability in the prices of steel, aluminum and other commodities.
Companies like Maruti and Bajaj, which produce on a larger scale, can reflect this advantage in their product portfolio.
Increasing demand in rural markets
There is an increase in demand for vehicles among farmers and small businessmen in rural areas. The increase in sales of tractors and two-wheelers is a direct example of this.
Bajaj Auto has strengthened its reach in rural areas, while Maruti Suzuki has maintained its hold in the rural market through its entry-level models.
support government policies
Indian government policies, such as the Production Linked Incentive Scheme (PLI), are boosting the auto sector. Apart from this, infrastructure development and reduction in interest rates on vehicle loans are also helping the sector.
With government incentives, companies are expanding not only in the domestic market but also in the export market.
Positive rating for Maruti Suzuki and Bajaj Auto
BofA SEC has given “thumbs up” to Maruti Suzuki and Bajaj Auto in its analysis. The reason behind this is their strong financial position, innovation and ability to lead the market.
Maruti Suzuki: This company making affordable and reliable cars remains the first choice for the middle class consumers of India.
Bajaj Auto: With its strong two-wheeler and three-wheeler portfolio, Bajaj Auto has maintained its hold in both rural and urban markets.
future prospects
BofA SEC believes that India’s auto sector will grow at a rapid pace in the next few years. In the digital age, automobile companies are focusing on technology, connected vehicles and electric mobility.
Additionally, changing consumer preferences and growing interest in the premium segment are also opening new doors for the sector.
