Auto Sector Set For Strong Q1FY27 Revenue Growth, But Margin Pressure May Weigh On Profits

India’s automobile companies are likely to report a strong revenue performance for the June quarter, with original equipment manufacturers (OEMs) expected to record 22–29% year-on-year growth and auto ancillary companies projected to grow 17–21%, based on brokerage estimates.

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The growth outlook is supported by higher vehicle volumes, price increases, premiumisation, exports and the impact of rupee depreciation. Passenger vehicle volumes are estimated to have risen 23–26% during the quarter, while two-wheeler and commercial vehicle volumes are expected to have grown 14–19%.

Newer models, sales of compact cars, and SUVs boosted the passenger cars sub-segment, whereas in the two-wheelers sub-segment, the performance of scooters was higher than that of motorcycles, but electric vehicles were more popular. Commercial vehicle demand benefited from replacement activity, infrastructure and mining-related demand, as well as e-commerce activity.

Input Costs Likely To Limit Profit Growth

Despite the strong topline outlook, earnings growth is expected to be more moderate. Higher prices of steel, aluminium, copper and rubber, along with crude-linked costs and freight expenses, are likely to weigh on operating profitability.

West Asia tensions added to export costs and execution risks during the quarter, although the overall impact on export demand was limited, based on the auto sector outlook.

Mixed Performance Expected Across Automakers

Tata Motors is expected to see strong growth in its India passenger vehicle business, although weakness at Jaguar Land Rover (JLR) could offset part of the improvement. Nuvama expects India PV revenue to rise 56%, while JLR revenue could decline 9% in pound terms. Consolidated revenue growth estimates from brokerages range around 5–8%.

The income for Mahindra & Mahindra will grow by 21% to 26%, mainly due to sales growth in the segments of SUVs, EVs, export and tractors. Commodity price pressure and higher proportion of EVs may impact its profitability by 30-170 basis points.

The revenue of Maruti Suzuki is forecasted to rise 35%-38% on the back of domestic sales, exports, growth in small car sales, and benefit from the currency. Several forecasts show that it will suffer loss in its bottom line despite strong topline growth.

Revenue and profit of Hyundai Motor India are forecasted to decline 0%-2% and 38%-40%, respectively for Q4FY21.

Two-Wheeler Segment Likely To Outperform

The revenue and profits of Bajaj Auto are forecasted to increase 30%-36% and 25%-34%, respectively. TVS Motor revenue and profits are expected to increase 31%-37% and 23%-35%, respectively.

Hero MotoCorp revenue may rise 28–30%, although higher input costs, promotional spending and EV investments could limit profit growth.

Among commercial vehicle makers, Tata Motors’ CV revenue is expected to rise 19–22%, while Ashok Leyland is also likely to report double-digit revenue growth. Auto ancillary revenue is estimated to grow 17–21%, with Sona BLW, ASK Automotive, Motherson Wiring and Minda Corporation expected to report stronger performances, while tyre makers may face greater commodity cost pressure.