India auto margins could recover gradually after the second quarter of fiscal 2027 as manufacturers’ price increases help offset higher commodity costs, Motilal Oswal Financial Services said. The firm also identified a possible El Niño and further escalation of the West Asia crisis as risks to the outlook.
Key Takeaways
- Higher commodity costs continue to pressure vehicle and component manufacturers.
- Second-quarter sales grew across major segments, aided by festive-season dispatches and a favourable year-earlier comparison.
- Motilal Oswal expects sales growth to moderate as the low comparison base normalises.
Why India auto margins could improve
Motilal Oswal said much of the impact of higher commodity costs had already appeared in first-quarter results. Price increases by original equipment manufacturers are expected to provide some relief in subsequent quarters.
The projected improvement is an analyst outlook, not a reported recovery 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. |
Vehicle sales rose across segments
Automobile sales remained strong in the second quarter of FY27, supported by a favourable comparison with the same period a year earlier and increased dispatches ahead of the festive season. Sustained freight activity also supported commercial vehicle growth despite macroeconomic challenges.
September 2026 growth was partly supported by a low base: manufacturers had deferred dispatches in September 2025 to take advantage of goods and services tax rate cuts. Internal combustion engine two-wheeler sales rose around 11% year over year in September 2026, while passenger vehicle sales grew around 22%.
Risks to the outlook
Motilal Oswal expects growth rates to moderate in coming quarters as the low base across vehicle segments normalises. It also said the possible impact of El Niño during the year and any further escalation of the West Asia crisis warrant monitoring.
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