Maruti Suzuki Q2 Profit Drops 26% Amid Rising Costs and Forex Impact

Maruti Suzuki India Ltd (MSIL), the country's largest car manufacturer, reported a 26.4 percent decline in its consolidated net profit for the second quarter of fiscal 2026-27. The profit dropped to ₹2,466.1 crore from ₹3,349 crore recorded during the same period last year. The significant fall is mainly attributed to rising commodity prices and unfavorable foreign exchange movements, which increased the company’s expenses. Additionally, losses from its mutual fund investments further weighed on income from non-operating sources.

Despite these challenges, Maruti Suzuki’s consolidated revenue from operations grew by 26 percent year-on-year, reaching approximately ₹53,355 crore compared to ₹42,344.2 crore in Q2 of the previous fiscal year. However, the company’s total expenses surged by about 29.7 percent to nearly ₹50,619 crore, outpacing revenue growth. This imbalance between rising costs and revenue squeezed overall profitability even though sales volumes improved.

Management acknowledged the cost pressures and mentioned that the company has implemented three price hikes in recent months to counteract the rising input costs. Alongside pricing adjustments, Maruti Suzuki is also focusing on controlling expenses, including tightening marketing budgets, to stabilize margins.

Arnab Roy, Chief Financial Officer of MSIL, highlighted an improvement in the company’s underlying operating performance. The earnings before interest, tax, depreciation and amortization (EBITDA) margin improved sequentially, rising to 9.4 percent in Q2 from 8.6 percent in the previous quarter. EBITDA reflects earnings from core operations before certain expenses are deducted.

Roy pointed out that depreciation costs increased due to expanded capital expenditure. Moreover, mark-to-market valuation adjustments on the company’s mutual fund investments negatively affected its profit before tax (PBT). Excluding these non-operational factors, both EBITDA and earnings before interest and tax (EBIT) showed growth, indicating healthier operational profit.

Maruti Suzuki’s presentation attributed the margin pressures primarily to elevated commodity prices, influenced in part by geopolitical tensions in West Asia, as well as adverse currency fluctuations. The company’s management noted that improved pricing realizations and efforts to reduce costs helped mitigate some of these headwinds.

Vehicle sales for the quarter reached 696,654 units, marking a 26.5 percent increase compared to the year-ago period. This reflects sustained demand in the Indian automotive market despite the inflationary environment. MSIL’s CEO and Managing Director, Hisashi Takeuchi, mentioned during a video conference that the company is trying to balance recovering input cost increases without transferring the full burden to customers immediately, aiming to preserve demand in a rapidly growing market.

Takeuchi also indicated plans for further price increases over the next six months at carefully chosen times to improve profit margins. This approach shows the company’s cautious stance in a competitive market where customer sensitivity to price changes remains a factor.

On the demand front, Partho Banerjee, Senior Executive Officer of Marketing and Sales, noted robust interest in compressed natural gas (CNG) vehicles, driven partly by rising fuel costs. However, limited availability of CNG kits poses a challenge to meeting this demand fully. Banerjee also reported that rural markets now account for nearly 52 percent of sales in the first half of FY27, up by 2.2 percentage points.

He cautioned that regions such as Rajasthan, Madhya Pradesh, and Karnataka could face demand disruptions due to deficient rainfall. According to data from the India Meteorological Department, rainfall has been about 20 percent below average in these areas, but Maruti Suzuki has not yet observed a significant impact on festive season sales.

MSIL Chairman R.C. Bhargava shared his perspective on India’s automotive future, emphasizing that small cars will continue to hold a large market share even by 2047 when India is projected to reach developed nation status. He explained that a broad spectrum of consumers will continue to seek vehicles at different price points, ranging from luxury brands like Maybach and Porsche to affordable models such as the Maruti Alto.

Bhargava’s remarks highlight the diversity and resilience of India’s car market, which is expected to cater to varied income segments as the economy grows and consumer preferences evolve. Maruti Suzuki’s performance in the current quarter underscores the ongoing challenges in the auto sector, including commodity inflation and currency volatility, while also reflecting the strength of demand and the company’s adaptive strategies.

As one of the leading players in India’s automotive industry, Maruti Suzuki’s efforts to manage costs, adjust pricing, and respond to shifting market dynamics provide insights into how manufacturers are navigating a complex economic environment. The company’s results also illustrate the balance between sustaining growth and managing profitability amid external pressures.