India's auto sector is projected to report a sharp rise in first-quarter FY27 revenue, driven by robust industry demand and pricing gains. However, margin pressure from higher input costs following the West Asia conflict is likely to cap EBITDA growth at 10 per cent, according to a report by Nuvama Institutional Equities.
Revenue Growth Driven by Strong Volumes and Pricing
The report indicates that most original equipment manufacturers (OEMs) and ancillaries are expected to post healthy double-digit growth, supported by strong volumes and favourable currency movements. However, performance will be uneven across the sector.
Select two-wheelers and certain ancillaries are expected to outperform, whereas some passenger vehicle (PV) players and tyre-linked names may face margin pressure due to cost inflation and lower scale effects.
Input Cost Inflation and Geopolitical Tensions
According to Nuvama, commodity costs have been trending higher in recent quarters, driven by geopolitical tensions, surging energy prices, and supply-demand mismatches. These factors are squeezing margins across the sector.
Domestic passenger vehicle volumes rose about 26 per cent year-on-year in Q1FY27, while exports increased around 6 per cent. Revenue growth was supported by a richer product mix and higher electrification.
Tractor and Two-Wheeler Segments Show Strong Growth
Domestic tractor volumes expanded by around 20 per cent, with revenue growth further supported by improved realisation. Meanwhile, domestic two-wheeler volumes grew nearly 19 per cent, and exports increased over 30 per cent.
Nuvama noted that better realisations and favourable currency movements are expected to support revenue growth. The brokerage forecasts OEM revenues to rise by as much as 36 per cent.
Commercial Vehicle Segment Momentum
In the domestic commercial vehicle segment, volumes rose about 19 per cent year-on-year in Q1FY27, benefiting from a favourable base and replacement demand. This momentum is likely to drive healthy revenue growth.
“For Q1FY27, we forecast aggregate revenue for our coverage to surge 22% YoY, led by robust underlying industry growth and improved pricing. However, EBITDA growth is likely to lag at 10% YoY, primarily due to input cost pressures post-West Asia conflict,” said Nuvama.
