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Company reports broad-based growth across small cars and SUVs, while expanding manufacturing capacity to approximately 2.9 million units annually
Maruti Suzuki is strengthening its manufacturing capacity to support future demand, adding about 500,000 units across its Kharkhoda and Hansalpur facilities. With these additions, the company’s total annual production capacity across Haryana and Gujarat has increased to approximately 2.9 million units.
The Print Times
Chief Investor Relations Officer, Maruti Suzuki Limited, Mr. Rahul Bharti, attending the Q1 FY27 concall, said that “for the first time in many, many years, every aspect of our business seems to be highly positive.” He said that after the GST reduction, the company has seen strong demand momentum, with small cars coming back “with a bang.”
Mr. Bharti said small car sales grew 34% year-on-year during the quarter, while SUVs grew by 44.6%, bringing the company close to SUV leadership in absolute numbers. “So, we grew in all segments, and obviously, as a consequence, our domestic market share increased by 2.3 percentage points in this quarter to 41.2%,” he said.
He added that exports also grew by 28% during the quarter. According to him, after the GST reduction last year, sales had grown, but the company did not have sufficient capacity to meet demand. In Q1, Maruti Suzuki commissioned one plant in Kharkhoda, while another capacity addition took place in July in Q2. The company also announced a second plant in Gujarat in close succession, with the additions together accounting for about 500,000 installed capacity, although ramp-up is involved.
Strong Underlying Business
Mr. Bharti said the underlying strength of the business gives the company “even greater confidence.” He noted that it is not often that so many growth drivers come together at the same time, and therefore, the company looks at the future with considerable optimism and confidence.
He said the company continues to expand capacity to support future demand. However, the West Asia crisis resulted in some commodity, energy and logistical cost increases during the war, which he described as a temporary phenomenon.
According to Mr. Bharti, the conflict in West Asia created significant uncertainty across global supply chains. Maruti Suzuki, operating at a scale of over 2.5 million units per annum and working with nearly 450 tier 1 suppliers and close to 2,000 tier 2 suppliers, faced challenges in ensuring continuity of supplies.
“The company responded swiftly and worked closely with its supplier partners to assess vulnerabilities and implement dynamic countermeasures across the supply chain,” he said.
The sudden and steep increase in commodity and energy prices created some working capital pressure for several suppliers. To support suppliers and ensure uninterrupted production, the company temporarily revised the settlement cycle for certain commodities, including aluminum, plastics and rubber, from a quarterly lag to a monthly lag basis.
Mr. Bharti described this as an “extraordinary one-time measure” taken in response to extraordinary circumstances, adding that the temporary change in the settlement cycle adversely impacted profitability during the quarter.
Domestic Wholesale Volume Crosses 534,000 Units
“In simple terms, the company faced a double impact: one from higher commodity prices, and two from an accelerated pass-through of these higher costs to our quarterly results,” Mr. Bharti said.
However, these measures enabled the company to maintain production continuity and meet customer demand without disruption. The company also took a calibrated two-step price increase, with most of the benefit expected to flow into the second quarter.
The company recorded quarterly wholesale volume of over 534,000 units in the domestic market in Q1, representing growth of nearly 33% year-on-year. The growth was broad-based and supported by healthy participation from first-time buyers.
The company's portfolio in the 18% GST slab, comprising small cars, grew by about 34% year-on-year, while the portfolio in the upper 40% GST slab grew by nearly 28% year-on-year. In both categories, the company's growth exceeded that of the industry.
The company's EV also recorded healthy growth during the quarter. Retail demand remained equally strong, while retail sales were broadly in line with wholesale dispatches. Dealer inventory closed at around 13 days at the end of the quarter, much below the company's optimum level of approximately one month inventory.
The pending customer order book remained healthy at about 130,000 units at the end of the quarter, with demand continuing to remain strong across both urban and upcountry markets.
Capacity Increased to Approximately 2.9 Million Units
Alongside business performance, the company continued to strengthen its long-term growth drivers through product interventions and capacity expansion.
In the SUV segment, the company recently introduced the new Brezza with a 1-liter turbo petrol powertrain and several customer-focused enhancements, including ADAS features, an underbody CNG variant and a 5-star Bharat NCAP safety rating in both adult and child occupant safety.
The new powertrain configuration positions the vehicle in the 18% GST bracket and enhances its competitiveness in the compact SUV segment. Mr. Bharti said customer response to both the turbo petrol and underbody CNG variants has been encouraging.
On the manufacturing front, the company commenced commercial production at the second plant of its Kharkhoda facility in Haryana during May 2026, adding annual production capacity of 250,000 units.
In addition, commercial production commenced at the fourth manufacturing line of the Hansalpur facility in Gujarat, adding another 250,000 units of annual capacity. With these additions, the company's total annual production capacity across Haryana and Gujarat has increased to approximately 2.9 million units. Both facilities will ramp up progressively in due course.
Exports Grow 28.6%
Despite geopolitical challenges and disruptions in the Middle East region, the company maintained its strong export momentum. Export volumes during Q1 of the financial year grew by approximately 28.6%.
Mr. Bharti said exports of passenger vehicles by the rest of the Indian industry declined by 8.4% during the same period. Maruti Suzuki continued to be India's leading passenger vehicle exporter and contributed more than 55% of India's total passenger vehicle exports during the quarter.
While exports to some markets in the Middle East were affected by the conflict, the company's long-term strategy of diversifying exports across nearly 120 countries helped mitigate the impact.
During the quarter, South Africa, Japan and Europe emerged as the leading export destinations. The conflict also resulted in logistical-related disruptions and volatility in shipping schedules. Mr. Bharti encouraged analysts and investors to look over a broad-based period like a quarter instead of monthly movements, as monthly movements may have some temporary logistical factors.
Financial Performance and Margin Impact
During the first quarter, the company recorded net sales of INR 499.6 billion compared with INR 366.2 billion in the corresponding period of the previous year. Net profit for the quarter stood at over INR 33.5 billion compared to INR 37.6 billion in the same period last year.
On a sequential basis, overall sales volume increased by about 1%, while net sales remained broadly flat. Operating profit or EBIT declined to 5.1% of net sales compared to 8.8% in the fourth quarter of financial year 2025-2026.
The decline in profitability was primarily driven by commodity-related pressures in the context of the West Asia conflict. Commodity costs had an adverse impact of approximately 300 basis points, of which nearly 110 basis points was attributable to the temporary change in the commodity settlement cycle from a quarterly lag to a monthly lag basis.
As conditions normalize, the company expects to gradually move back to the quarterly lag settlement cycle over the next few quarters, and some of the benefit will flow back.
Apart from commodities, higher gas costs impacted margin by approximately 20 basis points, unfavourable fixed cost absorption due to inventory depletion impacted margins by about 30 basis points, adverse foreign exchange movements impacted margins by about 30 basis points, employee costs were higher by about 40 basis points, and depreciation increased by about 20 basis points, primarily on account of the new Kharkhoda facility.
These adverse factors were partially offset by lower other expenses of about 30 basis points and higher operating income of about 30 basis points.
Company Strengthens Foundation for Next Phase of Growth
Mr. Bharti said the company took a conscious decision during the quarter to prioritize supply continuity and support its supplier ecosystem during an extraordinary period of uncertainty.
“While this decision had an impact on profitability, it enabled uninterrupted production and helped us achieve record sales,” he said.
Looking ahead, he said the company continues to strengthen the foundation for its next phase of growth by strengthening its product portfolio, expanding manufacturing capacity, pursuing a multi-powertrain technology pathway and enhancing its competitiveness across segments.
“With healthy demand fundamentals and multiple growth drivers coming together, we believe the company is entering a phase of renewed growth momentum, giving us confidence in our ability to deliver sustainable, healthy growth and create long-term value,” Mr. Bharti said.
