The Auto Original Equipment manufacturers from India (OEMs) will probably witness the margin pressure in Q1FY26E, affected by costs with a higher raw material (RM) and delverage, according to a report from HDFC Securities. The report added that increased prices of important inputs, in particular samples and platinum group metals, is expected to weigh on gross margins, while lower seasonal volumes can further burden the EBITDA margins.
For two -wheeler (2W) OEMs, a negative domestic product mix, weaker export contribution and a lower electric vehicle have added (EV) mix to the challenges. The report added that small price provisions are expected from players with two vehicles (2W) and Commercial Vehicles (CV), activated by the implementation of new regulations-OBD 2 standards from 1 April 2025 for 2Ws and AC cabin stands from 8 June 2025 for CVs.
The report added that auto-supporting companies are also under pressure, with a modest global demand and tariff uncertainty that clouded long-term planning. Tire makers can get some lighting from lower raw material prices, while some players can benefit from a decrease in aluminum costs, the report added. However, export -oriented companies are confronted with risks due to rising ocean costs and potential disruptions.
Delays in the return of workers of migrants could further influence the activities, according to the report. Adding the sector’s concerns is an imminent shortage of rare earth magnets, essential for both EV and ice cream vehicle components. With most global processing concentrated in China because of its radioactive and expensive nature, alternatives such as domestic production or purchasing from Japan remain in the long term prospects. In the short term, importing fully assembled components from China can be the only feasible solution, although this would increase costs, reduce localization and possibly influence PLI fitness, according to the report.
Published on July 12, 2025
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