Hyundai Motor India Ltd. has done well to defend margins even as domestic demand remained sluggish in the June quarter.
Gross margin rose 120 basis points (bps) year-on-year driven by a richer product mix, primarily higher contribution from its factory-fitted CNG (compressed natural gas) vehicles. Cost levers held firm even as discounts climbed to 3.4% of the average selling price. While staff and overhead costs limited the upside in the first quarter, Hyundai’s ebitda margin drop was curbed to 20 bps, to 13.3%.
That was the good news.
On the flip side, Hyundai’s volumes are not accelerating enough as domestic market demand remains patchy. Urban demand hasn’t quite recovered and the company’s launch calendar has been sparse.
The management is betting on the usual suspects to revive momentum: a good monsoon, festive season tailwinds, a fuller pass-through of interest rate cuts, and the eventual income bump from the pay commission rollout.
Rural demand, which is showing some green shoots, contributed 22.6% to the company’s first-quarter volumes, up from 19.9% in the year-ago first quarter.
Over FY23-FY26, Hyundai plans to launch 26 models, of which eight are scheduled by FY27. Until then, volume growth should be muted. Emkay Research expects marginal volume growth in FY26, with a pickup to 9-10% in FY27-FY28 as the pipeline improves and the industry revives.
Bracing for a seasonal softness
Hyundai’s first-quarter volumes fell 6% year-on-year to 180,399 units. Volumes in the domestic market dropped faster, at 11.5%, although exports growth at 13% was a silver lining.
Revenue realizations collected from sales and services rose just 0.7% as a better product mix was offset by lower pricing in exports due to discounted fleet orders. Thus, Hyundai’s revenue fell 5% to ₹16,413 crore in the first quarter.
The carmaker has maintained its FY26 exports volume growth guidance of 7-8%, though it expects some seasonal softness in the second half of the financial year.
Hyundai’s Talegaon plant in Pune is on schedule. Engine production has started and vehicle assembly is expected to begin by the third quarter (October-December). The added capacity will give Hyundai room to scale once the market turns.
It also helps that first-time car buyers now form 40% of Hyundai’s consumers, versus 32% in 2022.
Hyundai’s valuations aren’t stretched. Broking firm Nirmal Bang values the stock at 22x FY27 earnings, backed by Hyundai’s premium positioning, exports strength, and parent support. But the SUV (sports utility vehicle) market is crowded, competition is high, and near-term triggers are few.
For now, cost levers are doing the heavy lifting, but without new launches and a firmer urban recovery, investors may need to wait for Hyundai’s growth engine to gain speed.
