Auto Sales Q1FY27: Passenger Vehicle, Two-Wheeler Volumes Hit Record High; Kotak Sees Commodity Costs Pressuring Margins

India's automobile industry recorded its highest-ever first-quarter domestic sales across passenger vehicles, commercial vehicles and three-wheelers in Q1FY27, according to data released by the Society of Indian Automobile Manufacturers (SIAM). The strong volume growth came despite geopolitical disruptions in West Asia, supported by healthy domestic demand, lower financing costs and new model launches.

However, a Q1FY27 preview by Kotak Neo Research maintained a 'Cautious' view on the automobiles and components sector, citing higher commodity costs that are expected to weigh on profitability even as revenue growth remains healthy.

Auto Sales Q1FY27: Passenger Vehicles Lead Record Quarterly Volumes

SIAM data showed domestic vehicle dispatches increased across all major segments during the April-June quarter.

Passenger vehicle dispatches rose 25.9% year-on-year to a record 12.74 lakh units, compared with 10.12 lakh units in the year-ago period.

Two-wheeler dispatches climbed 20.3% YoY to 56.29 lakh units, while three-wheeler sales jumped 29.7% YoY to an all-time high of 2.14 lakh units.

Commercial vehicle sales also reached a record first-quarter level, rising 18.3% YoY to around 2.65 lakh units.

Exports remained robust across segments during the quarter. Passenger vehicle exports increased 8.8% to 2.22 lakh units, while exports of two-wheelers, three-wheelers and commercial vehicles grew 36.6%, 57.7% and 43.3%, respectively.

SIAM attributed the strong performance to resilient domestic demand, lower GST rates, softer financing costs, a favourable base effect and new product launches, despite supply chain disruptions linked to the conflict in West Asia.

SIAM Director General Rajesh Menon said the industry witnessed broad-based double-digit growth across all vehicle categories during the quarter. SIAM President Shailesh Chandra said domestic demand remained resilient despite external headwinds and added that the industry expects the momentum to continue into the festive season, while continuing to monitor commodity prices and geopolitical developments.

Kotak Expects Commodity Costs to Weigh on Auto Margins

While industry volumes remained strong, Kotak Neo Research expects higher input costs to pressure earnings during the June quarter.

According to its Q1FY27 preview, revenue for the auto companies under its coverage is estimated to grow 17% year-on-year, or 21% excluding Tata Motors. However, EBITDA margins, excluding Tata Motors, are projected to contract by around 160 basis points, primarily due to higher rubber and crude-linked raw material costs.

Gross margins are expected to remain under pressure across most original equipment manufacturers (OEMs), even as revenue growth stays healthy.

Q1FY27 Earnings Preview: Two-Wheelers Seen Outperforming

Among major automakers, Kotak expects Bajaj Auto to report around 40% YoY EBITDA growth, while TVS Motor and Eicher Motors are expected to post EBITDA growth of 32% and 27%, respectively.

Maruti Suzuki is estimated to deliver 7% EBITDA growth, while Mahindra & Mahindra is also expected to report around 7% growth.

In contrast, Hero MotoCorp's EBITDA margin is projected to decline by around 150 basis points year-on-year.

For Hyundai Motor India, Kotak expects a weaker quarter, estimating a 31% decline in EBITDA. Ashok Leyland's EBITDA is projected to decline 8%, while Tata Motors' domestic commercial vehicle business is expected to post 11% EBITDA growth.

Within Tata Motors, the passenger vehicle business is estimated to report 129% EBITDA growth on a favourable base, while Jaguar Land Rover (JLR) EBITDA is expected to decline 32% because of operating deleverage.

Auto Component Companies Face Margin Pressure

The report estimates auto component companies under its coverage will report 15% revenue growth during the quarter, although EBITDA margins are expected to decline by around 50 basis points because of commodity inflation.

Tyre manufacturers with higher domestic exposure are expected to post a relatively weaker quarter due to elevated raw material costs, while bearing manufacturers are likely to deliver steady year-on-year earnings growth.

Overall, It described the June quarter as mixed for the sector, with stronger earnings expected from two-wheeler manufacturers and diversified auto ancillaries, while higher commodity costs are likely to weigh on margins across several passenger vehicle and component companies.

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