Indian Automobile Sector: Q1 FY26 Performance Overview and Future Outlook

The Indian automobile sector presented a mixed performance in Q1 FY26, with overall industry growth positive year-over-year (YoY) but experiencing a quarter-over-quarter (QoQ) decline.

While some segments like tractors and three-wheelers demonstrated robust growth, passenger vehicles (PVs) and commercial vehicles (CVs) faced challenges due to muted demand and inventory issues.

The domestic passenger vehicle industry, for example, saw a 1.4% decline in wholesales in Q1 FY26, and the overall Indian automobile industry registered a 5.1% sales decline. Exports emerged as a significant growth driver for several manufacturers, offsetting domestic softness.

Key highlights from Q1 FY26 include:

• Overall Industry Growth: The Indian auto industry recorded a 1.9% YoY growth but a 1.3% QoQ decline in Q1 FY26, with total production volumes reaching 7.95 million units.
• Segment Performance: Tractors led growth with 12.7% YoY and 20.8% QoQ increases. Three-wheelers also showed strong 9.8% YoY growth, reaching record Q1 sales. Two-wheelers saw marginal 0.7% YoY and 0.9% QoQ growth. In contrast, Passenger Vehicles declined by 11.9% QoQ and Commercial Vehicles by 13.7% QoQ.
• Company Performance Highlights:
• Mahindra & Mahindra Ltd. reported strong consolidated revenue growth of 22% YoY and PAT growth of 24% YoY, driven by a 22% increase in SUV volumes and 10% in tractor volumes.
• TVS Motor Company Ltd. achieved its highest-ever quarterly sales, with revenue growing 20% and PAT by 35% YoY. Two-wheeler and three-wheeler sales grew by 17% and 46% YoY, respectively.
• Ashok Leyland Ltd. posted record Q1 FY26 revenue, EBITDA, and PAT, with net profit up 13% YoY and revenue up 1.5% YoY. Its net cash position significantly improved.
• Maruti Suzuki India Ltd. experienced a 4.5% decline in domestic passenger vehicle sales, largely offset by a 37.4% surge in exports, leading to a 1.1% overall sales increase YoY.
• Bajaj Auto Ltd. delivered robust financials with revenue over INR 12,500 crores and PAT of approximately INR 2,100 crores. Exports achieved record retail sales, and the EV business showed strong growth despite domestic demand softening.
• Hero MotoCorp Ltd. reported a positive start with its Vahan market share recovering to 30.9%, a 1% sequential increase. Revenue stood at ₹9,579 crores, and PAT was ₹1,126 crores, with consolidated PAT including a one-time gain.
• Tata Motors Ltd. recorded a 6% decline in total commercial vehicle sales and a 10% decline in total passenger vehicle sales YoY. However, international business for commercial vehicles grew by 67.9%.

Indian Automotive Industry Q1 FY26 Performance

The first quarter of FY26 saw varying performance across different segments of the Indian automotive industry. The overall auto industry production volumes reached 7.95 million units, showing a 1.9% YoY increase from 7.81 million units in Q1 FY25, but a 1.3% QoQ decline.

Passenger vehicle production reached 1.24 million units in Q1 FY26, up from 1.20 million units in Q1 FY25, though sales experienced a 1.4% YoY decline and an 11.9% QoQ decline. Utility Vehicles (UVs) within PVs saw 3.8% YoY growth, while passenger cars declined by 11.2% YoY.

Two-wheeler production inched up by nearly 1% YoY to 5.90 million units.

Commercial Vehicle sales experienced a marginal 0.6% YoY decrease, with volumes declining marginally due to weak freight movement, financing constraints, and regulatory changes.

Tractors were the strongest segment, growing 12.7% YoY to 0.29 million units, supported by a normal monsoon and improved rural sentiment. Three-wheeler sales reached a record Q1 level of 0.26 million units, showing 9.8% YoY growth.

Company-Specific Performance in Q1 FY26 (Apr–Jun 2025)

1. Maruti Suzuki India Ltd.

• Sales Volume: 527,861 units (+1.1% YoY; Domestic: –4.5%, Exports: +37.4%).
• Financials: Net sales ₹36,625 cr (+8.1% YoY); EBIT ₹3,058 cr (–18.9% YoY); PAT ₹3,712 cr (+1.7% YoY). Consolidated revenue ₹38,605 cr (+7.9%); consolidated PAT ₹3,792 cr (+0.9%).
• Export surge cushioned weak domestic demand, but EBIT fell due to higher commodity and employee costs, plus adverse operating leverage. Demand from first-time urban buyers remained subdued.

2. Tata Motors Ltd.

• Revenue: ₹104,407 cr (–2.5% YoY). EBIT ₹4,500 cr (margin 4.3%, –370 bps). PBT (bei) ₹5,617 cr. PAT \~₹3,924–4,003 cr (–62% to –63% YoY).
• Segment:
• JLR: £6.6 bn (–9.2% YoY); margin fell to \~4% (–490 bps).
• CV: ₹17,000 cr (–4.7%); margin +60 bps at 12.2%.
• PV: ₹10,877 cr (–8.2%); EBIT negative (\~–2.8%).
• JLR hit by US tariff impact and slower China demand; India PV volumes declined on affordability pressures; CVs resilient with margin gains from cost savings and pricing.

3. Mahindra & Mahindra Ltd.

• Revenue: ₹45,529 cr (+22% YoY). PAT ₹4,083 cr (+24%).
• SUVs continued to drive growth (+22% volumes; 27.3% market share, +570 bps). CV volumes rose 4%. Tractor business strong with +10% volumes, market share 45.2%. Balanced Auto (10% PBIT) and Farm (19.8% PBIT) margins ensured profitability.

4. Hero MotoCorp Ltd.

• Revenue: Standalone ₹9,579 cr (–5.6% YoY); consolidated ₹9,728 cr (–4.7% YoY).
• PAT: Standalone ₹1,126 cr (+0.3% YoY); consolidated ₹1,706 cr (+65.3% YoY including ₹722 cr one-time gain from Ather stake dilution).
• Core ICE business stable with better mix and 16.8% EBITDA margin, but revenue dipped on weak volumes (production halt in April). Consolidated profit inflated by exceptional gain, masking muted underlying growth. EV share improved to 7% in Q1, >10% in July.

5. Bajaj Auto Ltd.

• Revenue: ₹12,584 cr (+6% YoY). EBITDA margin \~19.7%. PAT ₹2,210 cr (+14% YoY).
• Exports at record highs (+16% YoY) offset weak domestic two-wheeler demand. Strong growth in premium motorcycles, Chetak EV (>2x volumes, EV share 21%), and commercial vehicles (+11% YoY, e-auto share 35%). Currency headwinds limited further margin upside.

6. TVS Motor Company Ltd.

• Volumes: 1.277 mn units (highest ever).
• Revenue: Standalone ₹10,081 cr (+20%); PAT ₹779 cr (+35%). Consolidated revenue ₹12,210 cr (+18.4%); consolidated PAT ₹610 cr (+32%).
• Broad-based growth across motorcycles (+21%), scooters (+19%), and 3Ws (+46%). Electric scooters up 35% to 70,000 units. Exports +54% YoY drove additional topline. Operational leverage and cost control boosted margins to 12.5%.

7. Ashok Leyland Ltd.

• Revenue: ₹8,725 cr (+1.5%). EBITDA ₹970 cr (11.1% margin, +50 bps). PAT ₹594 cr (+13%).
• Domestic MHCV volumes grew 2% despite industry decline, LCVs up 1.4%. Market share gains in MHCV (31.1%) and LCV (12.9%). Export volumes surged 29%. Balance sheet strengthened with ₹800 cr net cash (vs net debt last year).

Here is a summary of key financial and operational highlights in Q1 FY26:

* Hero MotoCorp consolidated PAT includes a ₹722 crore one-time gain; without it, underlying PAT growth would have been flat to slightly negative.

Future Outlook and Key Trends

The outlook for the Indian automotive sector remains positive for the remainder of FY26 and beyond, driven by several factors, though specific challenges persist.

Overall Industry Outlook:

• The industry expects a better festive season in Q2 and Q3, driven by positive monsoon conditions and improving rural sentiment.
• CRISIL Research and IHS project varied growth across segments:
• Passenger Vehicles: Production growth of 5.0% (CY2024-CY2025) and a 4.5% CAGR from FY2025 to FY2030.
• Medium and Heavy Commercial Vehicles (MHCVs): Anticipated 2-4% decline in FY26, but will expand at a 2-4% CAGR from FY2025 to FY2030.
• Tractors: Forecasted 3-5% decline in FY26, but expected to grow at a 5-7% CAGR from FY2025 to FY2030.
• Two-Wheelers: Expected to increase by approximately 7-9% in FY26 and expand at a 7-9% CAGR from FY2025 to FY2030.
• Government spending, improved vehicle financing, and sustained export momentum are expected to support overall growth.

Company-Specific Outlook and Strategies:

• Maruti Suzuki India Ltd.: Management is optimistic about the festive season due to monsoon and upcoming launches of two new SUVs (one electric, one non-electric). Rural markets are outperforming urban areas. Clarification on CAFE norms is expected within one to two months, which will provide clarity for powertrains starting April 1, 2027.
• Tata Motors Ltd.: Expects commercial vehicle volumes to improve in coming quarters, supported by a healthy monsoon, potential reduction in repo rates, and infrastructure development. The company is poised to leverage new launches in the passenger vehicle segment, with the Electric Vehicle (EV) segment being a bright spot.
• Mahindra & Mahindra Ltd.: The company aims to maintain its growth trajectory through strong execution across the group and continued market share expansion in the Auto and Farm segments.
• Hero MotoCorp Ltd.: Expects the two-wheeler industry to grow at 6-7% for the full year. Rural markets initially outpaced urban growth, but urban growth has strengthened recently. The company plans new product launches, especially in the 125cc segment, and premium and VIDA (EV) variants. Exports are seen as a significant growth opportunity.
• Bajaj Auto Ltd.: Management anticipates continued growth in exports, driven by a revival in emerging markets. Domestically, they expect growth in the 125cc+ segment and will introduce new products. The company is actively addressing supply chain issues impacting its EV business.
• TVS Motor Company Ltd.: Anticipates potential disruptions in the EV supply chain, particularly regarding magnet availability, which may pose short to medium-term challenges. However, the company expects increased volumes with the upcoming festive season.
• Ashok Leyland Ltd.: Expects double-digit revenue growth in FY26, driven by a strong defense order book. The company plans several new product launches, including new tippers, tractor trailers, multi-axle vehicles, LNG offerings, upgraded buses, and a bi-fuel LCV. A new plant in Andhra Pradesh is expected to reach 200 units/month capacity by year-end, and the Lucknow bus plant will be operational from Q3 FY26.

Overall, while Q1 FY26 presented some challenges, particularly in domestic PV and CV sales, the industry's resilience was supported by strong export performance, robust growth in the tractor segment, and the increasing momentum of Electric Vehicles. The outlook remains optimistic, banking on favorable monsoons, upcoming festive seasons, new product introductions, and strategic investments in EV technology and expanded market reach.

This piece is created using inputs from CompoundingAI.

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