More Stories

Informist, Thursday, Aug. 20, 2026

 

By Anand JC

 

MUMBAI – Automobile and ancillary companies expect no respite from persistent input cost pressures through at least the December quarter, as the two countries at war in West Asia remain mired in a stalemate. Rising costs forced companies to hike vehicle prices even before the war began in late February, but the attacks pushed energy prices to record highs, prompting more rapid and frequent price hikes.

 

Since January, automobile companies across segments have hiked prices at least once, while some have done so three times, as they juggle managing rising costs without hindering the demand cycle kick-started by the cut in goods and services tax in late 2025. Cost-reduction efforts and price hikes continued to be the primary levers for protecting margins in the quarter ended June.

 

Automobile companies reported strong revenue growth for the June quarter on the back of a robust increase in wholesale vehicle sales, partly driven by a low base. Yet, their profit growth could not match the momentum as input costs bit into their margins. Crude oil and aluminium prices, which saw the sharpest spikes in the June quarter, have now moderated as the war between the US and Iran remains unresolved, despite the absence of active combat.

 

While most automobile companies refrained from providing even a broad outlook for commodity costs, citing extreme volatility caused by the war, a few did. "In June, it was going only one direction and in second half, just everything crashed, and again, it's picking up. So it's very difficult in this environment to predict where it's going to go," Mahindra Group's Chief Financial Officer Amarjyoti Barua said at a post-earnings press conference.

 

The Thar maker has hiked prices 4.2% so far, but the increase does not account for the inflation being seen in steel and rubber. "So, some spillover is likely into Q2 because of that...as of now, we've got a balance with some pressure coming from steel prices and rubber still continuing into Q2 and possibly into Q3," Barua said.

 

The pain felt in the June quarter, primarily from commodity costs, will continue into the September quarter, Tata Motors Passenger Vehicles Ltd.'s chief Shailesh Chandra said. "Not only us, the industry will get hit with additional increases beyond the 4.5% (of revenue that the company faced in Q1). So, H1 (Apr-Sept) is going to be significantly bad as far as commodity prices are concerned," Chandra said.

 

Commercial vehicle maker Ashok Leyland Ltd. has already hiked prices by around 2.25% in two rounds. "The challenges we see continuing on the commodity price side. So, the respite from that we think will come in Q3 and Q4 only. So, it will be a challenging quarter," a senior company official said in a post-earnings analyst call. Peer Tata Motors Ltd. echoed the view, as it expects further cost pressure in the coming months in commodities such as steel and rubber, Chief Executive Officer Girish Wagh said.

 

'HYPERINFLATIONARY'

Pune-based two-wheeler maker Bajaj Auto Ltd. described the broad-based rise in prices as a "hyperinflationary" situation. The company had anticipated commodity inflation equivalent to 3.5-4.0% of its revenue in the June quarter, but it ended up at 4.5%.

 

"The commodity inflation we absorbed in this single quarter was greater than the totality of the inflation that we've experienced over the previous two financial years put together," Chief Financial Officer Dinesh Thapar told analysts in a post-earnings conference call in late July.

 

"The cost pressures have become more broader, with proprietary components, electronics, electrical parts, labour, logistics, and energy and conversion now moving up simultaneously and meaningfully," Thapar said. Bajaj Auto experienced only part of this broader cost inflation in the June quarter and will face a wider impact in the September quarter.

 

The sharp commentary by the Bajaj Auto official coincides with a crucial data point. HSBC Global Research's commodity cost index for two-wheeler companies rose nearly 47% on year and 10% on quarter in the June quarter. "Unless commodity prices fall from the current levels, there is downside risk in many cases," the research firm said, referring to its earnings estimates for automobile and ancillary companies.

 

OUTLOOK

In the quarters since the GST cut, multiple automobile companies have reported record-high revenues on the back of record-high wholesale sales. Their top line grew strongly year-on-year as they reaped the benefits of a low base.

 

But that double-digit growth will taper off from October. Executives expect sales to moderate in the second half of 2026-27 (Apr-Mar). The war between the US and Iran also prompted the Centre to raise petrol, diesel and compressed natural gas prices multiple times. Any subsequent resumption of hostilities in West Asia may send energy prices soaring again, and that remains a key risk to the earnings growth of these companies in FY27.

 

Commodity prices have eased from levels seen in the June quarter, although not across the board. "If the current metal and rubber prices sustain at current (spot) levels, the net headwind on gross margin for PV (passenger vehicle), CV (commercial vehicle), 2W (two-wheeler) and tractors OEMs (original equipment manufacturers) should see moderation in 2QFY27E (Jul-Sep) versus the sharp hit absorbed in 1QFY27 (Apr-Jun) (partly aided by price hikes taken across OEMs in July)," Kotak Securities Ltd. said in a report.

 

The brokerage expects tractor and commercial vehicle companies to face elevated raw material prices in the September quarter on a quarter-on-quarter basis because of higher steel and rubber prices.  End

 

Edited by Avishek Dutta

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

 

Informist Media Tel +91 (22) 6985-4000 

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2026. All rights reserved.