A steady demand environment and GST-led tailwinds are expected to support revenue growth for automobile companies in Q4FY26, although rising input costs and geopolitical uncertainties may weigh on margins.
Most brokerages expect healthy earnings growth across auto original equipment manufacturers (OEMs) and ancillary players on both a year-on-year (Y-o-Y) and quarter-on-quarter (Q-o-Q) basis. However, margin expansion is likely to remain constrained due to elevated commodity prices and supply-side risks.
Demand momentum remains strong across segments
Auto OEMs are expected to report robust performance in Q4FY26, supported by sustained domestic demand, improved affordability following GST rate cuts, and festive tailwinds such as Chaitra Navratri.
Analysts at Axis Securities said earnings are likely to remain positive, “with improvement across select companies driven by strengthening domestic demand, supported by the GST rate cut and the festive season,” although macro headwinds in March could weigh on exports.
Revenue for OEMs is expected to grow 22–26 per cent Y-o-Y, driven by double-digit volume expansion across passenger vehicles (PVs), two-wheelers (2Ws), and commercial vehicles (CVs), along with strong traction in tractors.
Sequentially, revenue is estimated to rise 3–4 per cent, aided by stable demand and improved realisations.
OEMs set for earnings growth, margins to stay range-bound
According to Axis Securities, “Revenue/Ebitda/PAT for our OEM coverage universe is expected to register strong Y-O-Y growth of 25 per cent/29 per cent/15 per cent,” driven by sustained demand momentum, stable commodity inflation, and supportive regulatory norms.
Margins, however, are likely to remain range-bound. “Ebitda margin expansion… is anticipated to be supported by a richer product mix… partially offset by elevated discounts and higher advertisement spends,” said the brokerage.
JM Financial noted that while demand remains resilient, cost pressures are building up. “We expect 4QFY26E to reflect limited impact from these disruptions, supported by continued demand momentum,” it said, adding that margins are likely to see only “marginal pressure” during the quarter.
Auto ancillaries to sustain momentum
Auto ancillary companies are expected to report steady growth, supported by volume expansion and diversified product portfolios.
Axis Securities said, “We estimate revenue/Ebitda in Q4FY26 to grow by 19 per cent/15.6 per cent Y-O-Y for auto ancillary companies,” driven by sustained demand momentum and premiumisation trends.
Centrum Broking also highlighted strong growth visibility. “We expect our Auto OEM and Ancillary coverage universe to deliver 26.3 per cent Y-O-Y revenue growth in Q4FY26E, underpinned by double-digit volume expansion,” it said.
Sequential growth for ancillaries is expected to remain healthy, supported by better product mix and operating efficiencies.
Input cost pressures, geopolitical risks persist
Rising commodity prices remain a key concern. Steel, aluminium, and copper prices have all moved higher during the quarter, increasing cost pressures across the value chain.
JM Financial said “heightened geopolitical uncertainties have resulted in elevated energy prices, supply chain disruptions, and increased inflationary pressures,” warning that the duration of these risks remains uncertain.
Centrum Broking added that “margin expansion [is expected] though input cost pressure exists,” with elevated commodity costs likely to partially offset gains from operating leverage.
Company-specific factors to watch
FY27 Outlook: Growth intact, margin visibility cautious
While Q4FY26 is expected to remain strong, brokerages remain cautious on the outlook.
JM Financial said margin pressures are likely to intensify going ahead, estimating a contraction of around 110–130 basis points in FY27 for OEMs and ancillaries, with “gradual normalisation anticipated in 2HFY27.”
Axis Securities also flagged risks to exports and production. “Export volumes are expected to remain broadly stable in Q4FY26 but may face pressure… amid the ongoing US–Iran conflict,” it said.
(Disclaimer: View and outlook shared belong to the respective brokerages/analysts and are not endorsed by Business Standard. Readers’ discretion is advised.)
