Hyundai Motor India Ltd's December quarter (Q3FY26) financial performance has elicited a tepid response from market analysts and investors. The company's EBITDA margin remained unchanged year-on-year at 11.2%, reflecting persistent challenges in operational efficiency despite some improvements in unit economics.
Financial Performance and Cost Pressures
While the overall EBITDA margin showed no growth, there was a modest enhancement in vehicle-level profitability. EBITDA per vehicle, excluding other operating revenue, increased by 2% to ₹82,067. This marginal improvement occurred despite a significant rise in staff costs and other operational expenses. In contrast, gross profit per vehicle demonstrated stronger growth, climbing approximately 9% to ₹217,000 per vehicle.
Several factors contributed to the increased cost structure, including the commissioning of Hyundai's new manufacturing facility in Pune. This expansion represents a strategic investment in production capacity but has temporarily impacted operational expenses during the quarter.
Volume Performance and Market Share Dynamics
The volume story proved particularly concerning for Hyundai. Domestic sales remained stagnant year-on-year at 1.47 lakh units, highlighting the company's struggle to gain traction in the competitive Indian automotive market. This performance stands in stark contrast to rival Maruti Suzuki India Ltd, which reported robust 21% volume growth to 5.65 lakh units during the same period.
This divergence in performance is clearly reflected in stock price movements. Hyundai shares currently trade below their closing price from before Independence Day, when Prime Minister Narendra Modi first hinted at potential GST rate reductions. During this same timeframe, Maruti's stock has appreciated by 10%, though this remains well below the 34% peak gain it achieved earlier.
GST Impact and Competitive Landscape
Maruti Suzuki emerged as the primary beneficiary of September's GST rate cuts, largely due to its extensive small and compact car portfolio, which experienced 25% growth – significantly outpacing its overall domestic expansion. Hyundai, however, appears to have derived limited benefit from these tax reductions.
According to analysis from JM Financial Institutional Securities, "Entry into the commercial mobility segment, and new launches are yet to translate into meaningful volume growth for Hyundai." The report further noted that "Hyundai Motor India has been losing market share in the domestic market to competitors (11.5% as of Q3FY26 versus 14.6% as of Q1FY25), and pressure is expected to continue due to multiple SUV launches by competitors, a segment in which Hyundai's flagship Creta is positioned."
Export Performance and Future Opportunities
Exports provided the sole bright spot in Hyundai's Q3 performance, growing 21% year-on-year to approximately 49,000 units. This export surge contributed to a modest 5% overall volume growth for the quarter.
The potential for expanding India's role as an export hub, particularly for European markets, emerged as a key discussion point during the earnings call. Management acknowledged that the India-EU free trade agreement (FTA) presents new opportunities but emphasized that detailed study is required during these early stages. Currently, Hyundai exports vehicles to the Middle East, Asia, Africa, and Latin America but has not yet entered the EU market, where the Creta is currently supplied from Indonesia.
Future Outlook and Analyst Perspectives
The outlook for Q4FY26 appears more promising on both volume and margin fronts. Hyundai's January domestic wholesale volumes increased by 11.5% year-on-year, while exports maintained their momentum with 21% growth, resulting in overall volume expansion of 9.5%. Additionally, price hikes implemented in January should contribute to improved profitability, assuming steel prices – a crucial raw material for automotive manufacturers – remain stable.
Nomura's analysts project that Hyundai's new model cycle, scheduled to begin in the second half of FY27, should help sustain volume growth momentum. They forecast a 24% earnings compound annual growth rate (CAGR) over the FY26-FY28 period.
The analysts also identified potential upside risks to their estimates if Genesis, Hyundai's luxury brand, achieves market success in India. For investors considering exposure to Hyundai's improving outlook, the recent 25% correction from the September peak price of ₹2,890 has made valuations more attractive, currently trading at approximately 20 times FY28 earnings per share based on Nomura's projections.
