India Auto: Premiumization, Export Surge, And Festive Demand Drive Q2FY26

India’s automobile industry turned in a strong September quarter, as leading players Hyundai Motor India (HMIL) and TVS Motor Company (TVSL) reported solid profit growth despite mixed domestic volumes and persistent cost pressures. The quarter underscored how the industry’s shift toward premium models, export expansion, and festive season demand are shaping the next phase of growth across both four- and two-wheeler segments.

Hyundai Motor India: Solid Profit Growth On Improved Mix; SUV Share At Record High

HMIL reported a 1.16% year-on-year (YoY) increase in revenue, aided by a better product mix and higher prices. Net profit rose 14.3% YoY, supported by stronger margins throughout the quarter. Overall volumes were slightly lower by 0.5% YoY, with domestic sales dropping around 7% to 1.40 lakh units. This decline was offset by a 22% increase in exports to 51,400 units.

Margin growth came primarily from a richer product mix. SUVs accounted for 71% of domestic volumes, the highest in the company’s history, while exports contributed 27% of total sales, up from 22% a year ago.

During the Navratri and Diwali festive period, HMIL recorded a 23% YoY growth in retail sales. The improvement was led by a 47% increase in sedans, a 21% rise in SUVs, and a 16% growth in hatchbacks. The company expects to grow in line with the industry in the second half of FY26, supported by the launch of the new Venue and other upcoming products.

Both urban and rural markets saw strong SUV demand, with rural contributions rising to 23.6% of domestic volumes, also a record high.

The new Pune plant, which started operations in October 2025, is expected to temporarily increase employee, overhead, and depreciation costs by about 20% until full capacity utilisation is achieved. HMIL expects operating efficiencies and cost-control measures to partially offset the short-term cost impact.

Export performance remained strong, with shipments to the Middle East and Africa up 35% and to Mexico up 11% YoY. Management now expects export growth to exceed the initial FY26 target of 7–8%, supported by expanded capacity at the Talegaon plant and sustained overseas demand.

Management highlighted that SUVs have become the key growth driver, gaining traction even in rural areas. Broader industry trends point to increasing premiumization: a PTI survey found that 80% of car buyers used tax reliefs to upgrade to higher-end variants or add-ons, 60% plan to move to higher trims within the same brand, and 46% have already shifted from hatchbacks to SUVs.

Despite global semiconductor supply challenges, particularly the Nexperia chip shortage, HMIL’s production remained stable through proactive inventory management and alternative sourcing plans.

Average discounts declined to 3.2% in Q2, compared to 3.4% in the previous quarter, reflecting a focus on sales quality and pricing discipline. Management believes discounting has peaked and should continue to moderate in the coming quarters.

Looking ahead, HMIL plans to launch 26 new products by FY2030, including eight models during FY26–FY27 to strengthen its domestic and export portfolio.

TVS Motor Company: Strong Revenue And Profit Growth; Highest-Ever Quarterly Volumes

TVS Motor Company reported 25.5% YoY revenue growth in Q2FY26, driven by healthy volume gains and improved pricing. Although the gross profit margin fell by 1% YoY, other operating margins showed modest improvement. Despite this, net profit surged about 42% YoY, supported by robust sales growth and operating leverage.

Total volumes increased by 22.7% YoY, with realisations up 5.1% YoY. The company achieved its highest-ever quarterly sales at 1.5 million units, led by broad-based growth across motorcycles (+20% YoY), scooters (+30.4% YoY), and three-wheelers (+41% YoY). The EV business also reported record sales of 80,000 units (+7% YoY), despite supply constraints linked to rare-earth magnet shortages.

After factoring in PLI incentives from Q4FY25, margin expansion on a like-for-like basis was 50 basis points YoY. However, margins were slightly below broker estimates due to higher-than-expected expenses, including ₹20–25 crore in additional R&D spending and ₹65 crore in marketing for three recent product launches.

The PAT miss was mainly due to higher interest and depreciation costs, as well as a ₹30.8 crore mark-to-market loss on the investment in TVS Supply Chain Solutions, which contrasted with gains in earlier quarters.

Management Commentary And Business Highlights

1. ICE Business Outperformance and Festive Surge:
TVS Motor’s internal combustion engine (ICE) volumes rose 23% YoY, significantly outperforming the domestic two-wheeler industry’s 11% growth. During the festive season, retail volumes increased 32% YoY, outpacing the industry’s 24%. Management expects the momentum to continue into H2FY26, aided by recent GST cuts, and projects 8% industry growth for the period. The company expects to outperform the industry, driven by new launches and network expansion.

The Jupiter 125 continued to perform well, contributing 35–36% of total Jupiter brand volumes. TVS also added 100 touchpoints to its domestic three-wheeler network in CY25, enhancing market coverage.

2. EV Business – Growth Amid Headwinds:
The Indian EV industry expanded 8% YoY in Q2FY26, even amid supply-chain challenges. TVS reported ₹1,270 crore in EV revenue, most of which qualified under the PLI scheme.
While the EV business delivered positive contribution margins, it remained EBITDA-negative due to continued investments in product development and capacity expansion. Nonetheless, momentum in the electric three-wheeler segment remained strong, with market share doubling to 11% during the quarter.

3. Product Launches and Electrification Strategy:
TVS strengthened its product lineup with three key launches:

• Ntorq 150: India’s first hypersport scooter, targeting the premium segment.
• TVS Orbitor: An affordable EV priced at ₹99,900, aimed at young urban buyers, initially launched in Maharashtra and Karnataka with a pan-India rollout by Q4FY26.
• King Cargo HD EV: A new electric three-wheeler designed for cargo and logistics, underscoring TVS’s growing presence in commercial EV mobility.

These launches reflect TVS’s dual strategy of expanding premium offerings and electrification, aligned with changing consumer preferences and supportive regulation.

4. Export Growth Across Geographies:
Exports rose 31% YoY, ahead of the industry’s 26%, driven by strong demand in Africa and Latin America (LATAM). Growth in LATAM, while from a smaller base, remained steady.
TVS also strengthened its leadership in South Asia, with robust performances in Sri Lanka and Nepal, and expanded its presence in Bangladesh.

Outlook: Industry Shifts Into A New Gear

Both Hyundai and TVS illustrate a clear shift underway in India’s auto landscape — from pure volume growth to value-driven expansion. Premiumization, export diversification, and EV readiness are emerging as the key levers of sustained profitability.

While short-term margins may face pressure from new capacity additions, R&D, and marketing spends, the structural direction is positive. SUVs now dominate passenger car demand, and two-wheeler manufacturers like TVS are successfully balancing ICE leadership with credible EV momentum.

The festive season provided the spark, but the fundamentals — rising rural aspiration, steady export markets, and a strong product pipeline — are keeping the engine running smoothly into FY26.

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