Q2 results preview: Robust volumes likely drove auto sector growth

But margins may have lost traction due to higher discounts, ad spends

The automobile sector is expected to post revenue growth in the range of 9–12 per cent in the second quarter of the 2025-26 financial year, driven by strong volumes following GST reforms and improved realisations, according to analysts.

 

Earnings before interest, tax, depreciation and amortisation (Ebitda) growth is forecast at 10-11 per cent by most brokerages. Revenue growth would be underpinned by low-to-mid single-digit industry growth across two-wheelers, passenger vehicles (PVs), and commercial vehicles (CVs), complemented by double-digit gains in tractors.

 

Among segments, domestic tractor volumes rose 31 per cent year-on-year, CVs by 10 per cent and two-wheelers by 9 per cent, while PV volumes dipped marginally by 1 per cent. Analysts at Nuvama expect Ebitda growth of 10 per cent across their coverage universe. They remain positive on the auto space, citing the benefits of GST rate cuts, new product launches, the upcoming pay commission for government employees, and recent interest rate and income tax reforms. Maruti Suzuki India, TVS Motor, and Mahindra & Mahindra (M&M) are among their top picks.

 

Ebitda margins, however, are likely to ease in Q2. Axis Securities noted that higher discounts and advertisement spending are expected to compress margins, though this will be partly offset by a richer product mix, higher exports, and price increases implemented over the past year.

 

Kotak Institutional Equities projects a 20 basis points (bps) year-on-year decline in Ebitda margins (excluding Tata Motors, margins would rise 30 bps year-on-year), driven by higher discounts, stepped-up marketing spends, and tariff-related pressures. Companies with overseas exposure are expected to post weaker results, it said.

 

Tractor growth has been buoyed by positive rural sentiment, with M&M’s farm division revenue estimated to grow 28 per cent. Execution of infrastructure projects has boosted CV volumes by 10 per cent, with Nuvama expecting 11 per cent revenue growth for Tata Motors’ CV division and 8 per cent for Ashok Leyland. Two-wheeler volumes increased 9 per cent year-on-year, with exports surging 30 per cent. Bajaj Auto and Hero MotoCorp revenues are likely to expand by 13 per cent in Q2.

 

In the PV segment, domestic volumes fell 1 per cent while exports rose about 18 per cent. Revenues for OEMs are expected to benefit from improved realisations, a stronger product mix, and progress in electrification. Nuvama expects M&M’s auto division to post 17 per cent year-on-year revenue growth, followed by Maruti Suzuki at 7 per cent, and Tata Motors’ PV division at 7 per cent.

 

Kotak Institutional Equities analysts expect Ebitda for Tata Motors’ PV business to rise 18 per cent YoY, but they expect Jaguar Land Rover (JLR) to report a weak quarter, with Ebitda down 12 per cent due to US tariff headwinds and production disruptions from recent cyberattacks. Tata Motors’ consolidated revenue is likely to edge down 2 per cent year-on-year, weighed by lower JLR volumes.

 

Auto component makers are projected to post 8-15 per cent revenue growth. Kotak expects a 10 basis points year-on-year decline in Ebitda margins, citing an unfavourable product mix --particularly in batteries -- alongside a weaker export mix in higher-margin segments and increased US tariffs.

 

“Overall, we expect Ebitda to grow 7 per cent year-on-year. We also expect companies with exposure to the global automotive market to report weak numbers, given the tariff situation in the US and muted global auto demand trends,” analysts at Kotak Institutional Equities noted.

 

Tyre manufacturers are poised to report an improved quarter, with Ebitda at Apollo Tyres, CEAT (standalone), and MRF expected to rise 11-15 per cent.  “Revenue growth will be impacted during the quarter, owing to subdued demand trends in the replacement segment due to a deferral in demand, owing to GST cuts,” they added.