According to the report, FY27 could be a year of normalization rather than a major upheaval. The boost to vehicle sales is likely to fade gradually due to GST-related measures. At the same time, consumer purchasing power, demand for new models and vehicle prices can affect the industry. So the success of the companies will not only depend on the sales figures, but also how much profit is generated from the sales.
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Companies with a strong range of premium vehicles, new car launches, efficient production systems and strong financial balance sheet can benefit in this scenario. Companies can improve earnings despite moderate sales growth due to controlling raw material costs and efficient use of capital, the report said.
On the other hand, a rise in the prices of steel, aluminum and other industrial raw materials may increase the cost of vehicle production. Companies may raise vehicle prices to cover this additional cost. But demand for entry-level vehicles in particular is likely to be affected as prices rise. Although raw material prices later eased, companies may retain some price increases. This can support their profits.
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According to the report, the impact of raw material prices will not be the same on every auto company. The impact will depend on the raw materials used by the company, contracts with suppliers, available inventory and ability to reduce costs. Vehicle sales, operating margins and efficient use of capital will also be important factors.
In the long term, the report is positive for the Indian auto sector. Investments in new production facilities, electric and alternative powertrains, local manufacturing, technology and exports may create future growth opportunities. Therefore, investors will be watching which companies increase sustainable profitability by controlling costs in FY27-28.