Auto sector posts strong April numbers with Maruti leading the charge, but FY27 challenges loom

India's automobile sector delivered a largely positive set of April sales numbers, with most major players reporting strong year-on-year growth despite a sequential dip that analysts say should not be read as cause for concern. That is the assessment of Ashwin Patil, Head of Fundamental Equity Research at LKP Securities, who broke down the numbers for ET Now and flagged what investors should watch for in the months ahead.

April numbers: Strong on YoY, soft on sequential, and that is fine

Patil was quick to caution against comparing April figures to March, which carried an unusually high base. Supply disruptions linked to the Middle East conflict also created sequential headwinds across the industry. On a year-on-year basis, however, the picture is considerably brighter — with almost every major auto company posting robust growth.

The standout performer was Maruti Suzuki, which bucked the sequential decline seen across the rest of the industry and actually grew volumes month-on-month. Patil attributed this to the ongoing GST benefit on small cars, which he had expected to fade by April but has continued to drive strong demand. The compact segment, including Alto and Wagon R, performed particularly well, alongside strong numbers from utility vehicles, vans, light commercial vehicles, and exports. The newly launched Vitara and the e-Vitara also contributed meaningfully, while rural market demand and CNG vehicle sales added further momentum.


Tractor companies also posted strong year-on-year growth, reinforcing the rural recovery narrative. Among two-wheelers, Hero MotoCorp delivered what Patil described as "stupendous" year-on-year growth, while Bajaj Auto continued to show strength in exports. The only notable softness came from TVS Motor, where growth moderated slightly.

Maruti's low inventory is the real story

Beyond the headline sales numbers, Patil pointed to Maruti's retail inventory levels as the most telling indicator of genuine ground-level demand. Unlike wholesale dispatches to dealers — which can flatter sales figures — retail inventory data reflects actual consumer purchases. Maruti's retail inventory sitting at historically low levels signals that demand is real, not dealer-driven stocking.

M&M earnings: Decent numbers, watch the margins

With Mahindra and Mahindra's quarterly earnings due, Patil expects a solid top-line performance supported by price hikes and a favourable product mix. The farm equipment and tractor segment is expected to hold margins steady or show slight improvement. However, the SUV segment faces pressure from a firmer raw material basket during the quarter, which is likely to weigh on overall margins.

Looking further ahead, Patil flagged the possibility of an El Niño effect in the second half of the monsoon season as a risk to tractor and farm equipment sales — a variable worth watching closely for investors with M&M exposure.

Auto ancillaries: Riding the wave, but margins under pressure

The strong volume environment has flowed through to the auto ancillary space, with companies including Belrise, Pricol, Sansera, and Endurance all reporting healthy top-line growth in the third quarter. Patil expects this trend to continue into the fourth quarter given sustained demand and volume pickup.

The catch, however, is margins. Commodity costs have firmed up significantly, and original equipment manufacturers are passing a portion of this cost pressure down the supply chain to ancillary companies. Most will report good revenue numbers, but profitability will remain under scrutiny across the board.

The broader message from April's data is one of resilience — but with FY27 uncertainties around monsoons, commodity costs, and global supply chains, the easy part of this auto cycle may already be behind us.