India auto margins could recover gradually beyond the second quarter of fiscal 2027 as manufacturers’ price increases help offset higher commodity costs, Motilal Oswal Financial Services said. The firm also flagged the potential impact of El Niño and further escalation of the West Asia crisis as risks.
Key Takeaways
- Higher commodity costs continue to pressure automakers and component manufacturers.
- Vehicle sales grew across major segments in the second quarter, helped by a favourable comparison base and festive-season dispatches.
- Motilal Oswal expects sales growth rates to moderate as the low base normalises.
Why India auto margins could improve
Motilal Oswal said much of the impact from higher commodity costs had already been reflected in first-quarter results. Price increases by original equipment manufacturers are expected to provide some relief, supporting a gradual margin recovery after the second quarter.
The expected recovery is an analyst forecast, not a reported improvement in margins.
| Item | Details |
|---|---|
| Passenger vehicles | Second-quarter FY27 sales rose 31.2% year over year. |
| Commercial vehicles | Second-quarter FY27 sales rose around 29% year over year. |
| Internal combustion engine two-wheelers | Second-quarter FY27 sales rose 10.4% year over year. |
Sales growth and risks to the outlook
Automobile sales remained strong across segments in the second quarter of FY27. A favourable year-earlier base and higher dispatches ahead of the festive season supported growth, while sustained freight activity also helped commercial vehicles.
September growth was partly aided by a low base: manufacturers had deferred dispatches in the prior-year month to take advantage of goods and services tax rate cuts. Sales of internal combustion engine two-wheelers rose around 11% year over year in September, while passenger vehicles grew around 22%.
Motilal Oswal expects growth rates to moderate in coming quarters as the low base normalises. It identified the possible impact of El Niño during the current year and any renewed escalation of the West Asia crisis as factors to monitor.
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