India’s automobile sector is heading into the Q1FY26 earnings season under pressure from weak global outlook, rising commodity prices, tariff uncertainties and China’s curbs on rare earth metal exports—key inputs for many auto components, especially EVs. While a few companies may post resilient numbers, analysts expect an overall subdued performance across automakers and component suppliers.
Brokerage firm Kotak Institutional Equities notes that rising discounts, margin pressures, and soft global demand are likely to weigh on profitability across the board.
Adding to the concern, India’s passenger vehicle market slowed down in June 2025. Total dispatches slipped nearly 6% year-on-year and 9.1 per cent month-on-month—marking one of the weakest months for the industry this year.
Auto sector Q1FY26 preview: Flat revenue, shrinking margins
Kotak expects revenues for auto companies under its coverage to grow by just 1 per cent year-on-year (YoY) in Q1FY26. However, excluding Tata Motors, the revenue growth improves to 6 per cent YoY.
The marginal growth is driven by low- to mid-single-digit increases in passenger vehicle (PV), two-wheeler (2W), commercial vehicle (CV), and tractor production volumes. Higher average selling prices (ASPs) have helped, but rising discounting and subdued global volumes have offset the gains.
EBITDA margins for OEMs (original equipment manufacturers) are expected to decline by 260 basis points YoY, it reduces to 80 bps when Tata Motors is excluded, largely due to steeper discounts, commodity headwinds (especially from tyre inputs), and increased marketing costs.
Tata Motors: JLR impact to keep Q1 results under pressure
Tata Motors’ global arm, Jaguar Land Rover (JLR), is expected to report a sharp EBITDA drop of more than 50 per cent YoY due to U.S. tariffs and weak demand in key international markets.
“Tariff-related impacts on JLR and a challenging demand environment are major drags this quarter,” Kotak noted.
JLR’s wholesale volumes (excluding the China JV) fell 10.7 per cent year-on-year to 87,286 units, while retail sales dropped 15.1 per cent to 94,420 units. North America and the UK witnessed steep wholesale declines of 12.2 per cent and 25.5 per cent, respectively, while sales in the Middle East and North Africa rose 20.5 per cent.
The company said the drop was expected due to the planned phase-out of legacy Jaguar models and a temporary halt in shipments to the US.
Auto sector Q1FY26 preview: Kotak sees margin resilience for Tata Motors
In contrast to JLR, Kotak is optimistic that Tata’s domestic passenger vehicles may deliver 9 per cent YoY EBITDA growth, supported by Production-Linked Incentive (PLI) schemes.
This comes despite a sharp decline in Tata Motors’ production and domestic sales for the April–June 2025 quarter (Q1FY26). Passenger vehicle production dropped nearly 16 per cent to 1,44,438 units from 1,71,578 in Q1FY25, while domestic sales fell over 18 per cent to 1,32,150 units from 1,61,104 units.
Auto sector Q1FY26 preview: Mixed performance across major auto names
Kotak expects Maruti Suzuki’s EBITDA to drop 18 per cent YoY due to higher discounts, commodity costs, new plant-related expenses, and increased marketing spend.
Among two-wheeler makers, TVS Motor is likely to be a standout performer with a projected 31 per cent YoY jump in EBITDA. Kotak attributes this to operating leverage, a richer product mix, and PLI-related gains.
Hero MotoCorp may see a marginal decline in margins, while Bajaj Auto’s EBITDA is expected to remain flat YoY as pricing pressures and raw material costs offset gains from forex and product mix.
Auto sector Q1FY26 preview: M&M to benefit from strong demand
Mahindra & Mahindra is expected to post a strong 24 per cent YoY growth in EBITDA, driven by robust tractor and auto volume growth and a richer product mix.
In its June 2025 sales report, Mahindra’s total domestic sales hit 76,335 units, up from 66,800 units last year, reflecting strong demand in both passenger and last-mile mobility segments.
Mahindra & Mahindra saw a sharp rise in SUV and electric vehicle production. The company produced 8,840 units of the Thar and Thar Roxx (diesel), a massive jump from 5,070 units a year ago, while sales almost doubled to 8,671 units. Its popular Scorpio diesel-maintained momentum with 13,369 units produced and 12,007 sold.
Domestic sales for tractors in June 2025 stood at 51,769 units, compared to 45,888 units in June 2024—reflecting a 13 per cent year-on-year growth.
Auto sector Q1FY26 preview: Auto component makers hit by costs
Kotak expects auto component companies to post 6.6 per cent YoY revenue growth, but with margin contraction of around 60 basis points due to inflationary pressures and weak global demand.
Tyre makers are likely to see mixed results: Apollo Tyres could report a 9 per cent YoY earnings decline, while CEAT and MRF may log low single-digit gains. Bearing manufacturers, however, could enjoy steady volume and margin growth driven by solid industrial and replacement demand.
Auto sector Q1FY26 preview: Exporters face headwinds
Companies with global exposure face tougher conditions. Bharat Forge may see a 5 per cent YoY drop in consolidated revenue due to weak exports and a strong defence base in the prior year. Sona Comstar may report a 3 per cent YoY revenue dip, with margins taking a sharp hit. Kotak highlighted that “ongoing weakness in the EV differential assembly business and lower US OEM production due to tariff uncertainty remain concerns.”
Auto sector Q1FY26 preview: Margin pressure likely to persist
Kotak warns that most OEMs will see gross margin pressure due to elevated discounts and commodity costs, though favourable forex movements may cushion the impact. Tyre makers may see slight sequential improvement, but YoY costs remain elevated due to high rubber prices and rising precious-metal costs—especially platinum.