Ashok Leyland, Hero Motocorp to M&M: Auto stocks rise despite E20 row

The Nifty Auto index rose 1% to an intraday high of 26,976.45 on Thursday, shrugging off the ongoing controversy surrounding the nationwide rollout of E20 ethanol-blended fuel. The rally was supported by gains across the broader market, with benchmark indices Sensex and Nifty 50 advancing around 1% each during the session.

Among the constituents, Balkrishna Industries gained 2%, while Mahindra & Mahindra (M&M) and Ashok Leyland rose 1% each. Tata Motors' passenger vehicle business, Samvardhana Motherson, Maruti Suzuki and Hero MotoCorp added over 0.5% each. MRF, Apollo Tyres and Exide Industries also traded in the green.

However, not all auto stocks participated in the rally. Bosch, Bharat Forge, Bajaj Auto and Eicher Motors were trading in the red.

Why is E20 fuel back in focus?

The rally in auto stocks came even as the debate around E20 petrol intensified. Vehicle owners have raised concerns over mileage loss, fuel quality and mechanical compatibility in older vehicles, while opposition groups have demanded greater transparency from automobile manufacturers regarding the long-term impact of E20 fuel on engine components.

Despite the criticism, Union Petroleum Minister Hardeep Singh Puri defended the nationwide rollout of E20 ethanol-blended petrol, dismissing the backlash as "deliberate fearmongering" and a manufactured controversy.

Meanwhile, Aam Aadmi Party (AAP) convenor Arvind Kejriwal on Wednesday wrote to 29 automobile manufacturers, expressing concerns over the use of E20 fuel in older vehicles.

Addressing a press conference in New Delhi, the former Delhi Chief Minister said he had separately written to Maruti Suzuki, Toyota and Hero, which had stated during a government press conference that the use of E20 fuel would not create problems for older vehicles.

The debate gained further momentum after motorists complained about lower fuel efficiency following the introduction of E20 petrol. Responding to the criticism, Union Road Transport and Highways Minister Nitin Gadkari challenged critics to identify even a single vehicle that had developed problems due to E20 fuel.

According to PTI, Gadkari said there had been no reported case of any car developing issues because of E20 petrol. He defended the ethanol-blending programme, noting that India has already achieved 20% ethanol blending with petrol using ethanol produced from biomass such as sugarcane, corn and rice.

The government's ethanol blending programme aims to reduce India's dependence on imported crude oil while lowering carbon emissions. Gadkari said the country spends around ₹22 lakh crore every year on fuel imports and described dependence on fossil fuels as both an economic burden and an environmental concern.

Auto sector Q1 preview

Despite concerns over input costs, the automobile sector is expected to report another quarter of healthy revenue growth in Q1FY27, driven by strong demand across passenger vehicles (PVs), two-wheelers, commercial vehicles and tractors, along with a better product mix, according to Nuvama Institutional Equities.

The brokerage estimates that the aggregate revenue of its auto coverage universe, excluding Tata Motors' passenger vehicle business, will grow 22% year-on-year, while EBITDA is likely to increase 10%, as higher commodity prices following the West Asia conflict continue to weigh on margins.

Nuvama said the domestic passenger vehicle industry recorded 26% year-on-year volume growth during the June quarter, while exports increased 6%. Improved realisations, supported by a richer product mix and higher electrification, are also expected to aid revenue growth.

Among passenger vehicle manufacturers, Tata Motors' India passenger vehicle business is expected to report the strongest revenue growth of 56%, followed by Maruti Suzuki at 37% and Mahindra & Mahindra's automotive business at 20%. In contrast, Hyundai Motor India is expected to post a 2% decline in revenue, according to the brokerage.

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