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Auto sector to remain under pressure in Q4 FY25, subdued domestic and global demand: Report

ANI April 17, 2025 231 views

The Indian automotive sector is bracing for a challenging quarter with weak domestic and global demand. HDFC Securities reports that original equipment manufacturers (OEMs) are likely to experience slow growth and complex market conditions. Despite potential margin improvements through operational efficiencies, trade barriers and supply chain complexities remain significant challenges. Export-oriented auto component companies are particularly vulnerable to these market dynamics.

"Auto companies could face business headwinds for a longer period on higher US tariffs and complex global supply chains" - HDFC Securities Report"
New Delhi, April 17: The Indian automobile sector is expected to report weak fourth-quarter results because of subdued demand in both domestic and global markets, according to a report by HDFC Securities.

Key Points

1

Auto sector facing subdued demand in domestic and global markets

2

OEMs expected to see slow growth in near term

3

Margin improvements possible through operating leverage and lower raw material costs

4

Export-oriented auto component companies under additional pressure

"Auto companies could face business headwinds for a longer period on higher US tariffs and complex global supply chains that may witness a structural impact. Even domestic companies could remain under pressure if India were to give favourable trade terms for import of cars, especially EVs, which could then impact the domestic PV players as well," said the report.

The report adds that most original equipment manufacturers (OEMs) are expected to see slow growth in the near term as demand continues to be soft.

It said, "Growth pressure is expected to continue for most OEMs as demand remains soft both domestically and globally. Margin to improve QoQ for OEMs on operating leverage, lower RM costs. Overall, we expect EBITDA margin to improve QoQ for OEMs on better operating leverage and softer RM costs."

However, the report added that operating margins of auto companies could improve on a quarter-on-quarter (QoQ) basis. This improvement is expected due to better operating leverage and a drop in raw material (RM) costs. As a result, EBITDA margins are likely to rise QoQ for most OEMs.

The report mentioned that some companies, including Mahindra & Mahindra, Maruti Suzuki, TVS Motor, and Hero MotoCorp, could see a hit to their margins because of the costs related to their participation in auto expos during the quarter.

The report also added that while most auto companies have taken price hikes during the quarter, the benefit may be partially offset by discounts. However, the level of discounts is expected to be lower compared to the previous quarter due to seasonal factors.

In the commercial vehicle (CV) segment, companies such as Ashok Leyland and Tata Motors are expected to see an improvement in margins QoQ. This will likely be driven by better operating leverage.

Export-oriented auto component companies may also remain under pressure; as even non-U.S. exports may be affected indirectly. This is because a significant portion of such exports eventually ends up in the U.S. market.

Overall, the outlook for the auto sector remains mixed, with cost efficiencies offering some relief, but demand and trade-related challenges posing significant headwinds.

Reader Comments

R
Rahul K.
Not surprised by this report at all. Been seeing fewer people buying new cars in my neighborhood. Everyone's holding onto their vehicles longer these days with rising costs. EVs might shake things up though! ⚡
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Priya M.
The report seems a bit too pessimistic about domestic demand. Festival season is coming up and that always gives auto sales a boost. Also, the monsoon forecast is good this year which helps rural demand.
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Amit S.
Respectful criticism: The article could have included more specific data points about which vehicle segments (hatchbacks, SUVs, etc.) will be most affected. The blanket statement about "auto sector" is too broad.
S
Sunita R.
As someone working in auto components manufacturing, this matches what we're seeing. Orders from OEMs have slowed down significantly since January. Hoping for better days ahead 🤞
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Vikram J.
The EV angle is interesting. If India does give favorable import terms for foreign EVs, it could really disrupt the market. Domestic manufacturers need to step up their EV game quickly!
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Neha P.
At least there's some silver lining with margins improving QoQ. Cost control seems to be working for these companies. Maybe they'll pass some savings to consumers with better deals? 🚗

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Tags:
Auto Sector HDFC Securities Indian Automotive Industry Mahindra & Mahindra Maruti Suzuki Economic Forecast Q4 FY25
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