Maruti Suzuki flags West Asia-linked commodity costs as margins come under pressure

Maruti Suzuki India’s profitability came under pressure in the September quarter as higher commodity costs linked to the West Asia conflict and unfavourable foreign exchange movements offset the benefits of record sales.

The conflict in West Asia has added uncertainty to global markets, with implications for commodity prices and business costs. For automakers such as Maruti Suzuki, higher input costs can eat into profits even when vehicle sales remain strong.

India’s largest carmaker reported its highest-ever quarterly sales in the July-September period of FY27, with volumes rising 26.5% year-on-year. Revenue also reached a record high, crossing ₹50,600 crore.


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However, the growth in sales did not translate into higher operating profits. Maruti Suzuki’s operating earnings before interest, taxes, depreciation and amortisation (EBITDA) fell 6.3% year-on-year, while operating profit, or EBIT, declined 17.1%.

In its investor presentation released on Tuesday, the company identified adverse commodity prices in the context of the West Asia conflict and unfavourable foreign exchange movements as factors weighing on its performance. Better realisations and cost-reduction efforts provided some support but were not enough to prevent a decline in operating earnings.

Rising material costs squeeze margins

The pressure was particularly visible in material costs, which cover the inputs required to manufacture vehicles.

Maruti Suzuki’s material costs accounted for nearly 80% of net sales in the September quarter, compared with about 76% a year earlier. This means the company spent a larger share of its revenue on materials, leaving less room for other expenses and profits.

Operating EBITDA margin fell to 9.4% from 12.7% in the year-ago quarter. The operating EBIT margin also declined.

The company’s presentation listed adverse commodity prices and foreign exchange movements among the factors affecting profitability. While it did not quantify the individual contribution of each factor, the increase in material costs shows the pressure on the company’s cost structure.

The impact was also visible in net profit, which fell to ₹2,414.9 crore from ₹3,302.8 crore a year earlier.

However, the decline in net profit was not solely linked to operating costs. Maruti Suzuki also reported lower non-operating income because of mark-to-market losses on its invested surplus. These losses reflect changes in the reported value of investments as market prices fluctuate.

Strong domestic demand offers support

The pressure on margins came even as demand for Maruti Suzuki vehicles remained strong. The company sold nearly 5.9 lakh vehicles in the domestic market during the quarter, up 33.6% year-on-year. Utility vehicles were a key growth driver, with sales in the category rising sharply. The company also reported an increase in its domestic passenger vehicle market share to 40.8%.

In its press release, Maruti Suzuki said its recently introduced SUVs had received a strong response from buyers.

Recent capacity additions helped the company meet some of the increase in demand. However, demand continued to exceed supply, leaving the company with around 17 days of network inventory and approximately 2 lakh pending bookings at the end of September.

Exports remained relatively weak, with shipments declining slightly from a year earlier. The company cited the challenging geopolitical environment in its press release.

Some improvement from the June quarter

Despite the year-on-year decline, Maruti Suzuki’s operating performance improved compared with the June quarter.

Its operating EBITDA rose around 10% sequentially, while operating EBIT increased by a similar margin. The EBITDA margin also improved from 8.6% in the June quarter to 9.4% in the September quarter.

The company attributed the sequential improvement to better realisations, cost-reduction efforts and a favourable impact from spreading fixed costs over higher production and inventory levels.

However, higher manufacturing overheads, increased depreciation associated with a new facility and new model dies, commodity prices and foreign exchange movements continued to weigh on performance.

Net profit, meanwhile, fell from the June quarter, partly reflecting the sharp decline in non-operating income and the impact of mark-to-market losses.

Sales grow in the first half, profits remain under pressure

For the April-September period, Maruti Suzuki recorded its highest-ever half-yearly sales, with volumes rising 27.9% year-on-year. Revenue grew 31% to more than ₹1 lakh crore.

Profitability, however, remained under pressure. Net profit for the first half declined from the year-ago period, while operating earnings also fell. Material costs accounted for a larger share of revenue than they did a year earlier, and the operating EBITDA margin contracted.

The results highlight the contrast between strong demand for Maruti Suzuki vehicles and the rising costs of meeting that demand. The West Asia conflict is one of the factors the company has identified as contributing to commodity cost pressures, alongside unfavourable currency movements and higher manufacturing expenses.