New Delhi – India’s top carmakers are heading into a strong quarterly earnings season, but the ongoing conflict in the Middle East is casting a shadow over the sector, with analysts warning of potential supply chain disruptions and rising raw material and fuel costs.
The world’s third-largest car market is expected to see revenue growth of between 11% and 26% among its leading manufacturers in the fourth quarter, according to data compiled by LSEG, with steep tax cuts helping push total sales to a record high for the fiscal year.
Industry leader Maruti Suzuki will kick off sectoral earnings on April 28. Analysts at Morgan Stanley said the maker of the popular Brezza compact SUV is expected to deliver one of its strongest quarters, supported by a richer export mix, with revenue growth projected at 25.5% according to LSEG data. 
Mahindra and Mahindra, maker of the Thar, is expected to benefit from a higher mix of electric SUVs and price hikes implemented in January, which analysts at HDFC Securities said would support margins on a sequential basis. However, the brokerage cautioned that electric vehicle related spending and new model launch expenses could offset the gains from those price increases.
Tata Motors Passenger Vehicles’ luxury unit Jaguar Land Rover is expected to see margins recover sequentially after production restarted following a cyberattack at its United Kingdom plant last year. The company was not included in the LSEG compiled estimates following its October demerger from its commercial vehicles unit.
Overall industry wholesale volumes grew 13.2% during the quarter, a sharp acceleration from the 2.4% growth recorded in the same period last year.
Hyundai Motor India could be the exception in an otherwise upbeat quarter, with analysts saying profitability would likely be constrained by an adverse product mix, higher marketing spend and elevated input costs. The company is estimated to post revenue growth of around 11%.
The months following India’s tax cuts in September saw a revival in showroom footfall and a volume-led recovery across price-sensitive small cars and sport utility vehicles, while lower discounts helped lift margins. Analysts say that cushion may now be thinning.
Rising prices of steel and aluminium, as well as freight costs, are beginning to weigh on profitability, while automakers remain cautious about implementing steep price hikes given competition and regulatory constraints. Maruti has indicated it will likely raise prices, following global peers Mercedes-Benz and BMW. HDFC Securities expects margins to soften sequentially across the sector, while analysts at CLSA estimate that carmakers would need to increase prices by about 6% to cushion the impact of soaring input costs.
“For upcoming quarters, the key risk is not demand collapse, but whether rising costs begin to outpace the industry’s ability to protect margins,” analysts at Motilal Oswal said in an earnings preview note.
