Maruti Suzuki's Q2 sales surge 26.5% as profit falls 26.8%

Maruti Suzuki's net profit fell 26.8% year-on-year to Rs 24.15 billion ($253.7 million) for the second quarter of FY 2026-27. This decline occurred despite a 26.5% surge in sales volume to a record 696,654 units and a rise in net sales to Rs 506.15 billion.

Domestic market share increased by 2.2 percentage points to 40.8%. Growth was led by specific segments. Small car sales increased by 35.9% and SUV sales grew by 68.2%. Demand significantly outpaced supply, resulting in a dealer network inventory of about 17 days. The pending order backlog reached approximately 200,000 units.

Profit and margin pressure

Despite the sales growth, profitability was severely impacted. Operating profit declined 17% to Rs 28.03 billion. The EBITDA margin shrank to 9.4% from 12.7% a year ago. For the first half of the fiscal year, net profit stood at Rs 57.67 billion, down from Rs 70.60 billion in the same period last year.

The primary driver was a sharp increase in input costs. Total expenses rose to Rs 50,619 crore from Rs 39,018.4 crore. The cost of materials consumed increased to Rs 37,488.5 crore from Rs 25,324.2 crore. The profit decline was attributed to higher input costs linked to commodity price inflation and the West Asia conflict.

Supply constraints and inventory challenges

The low inventory and large order backlog highlight persistent supply chain issues. Export sales fell 2.1% to 108,119 units, down from 110,487 units in the year-ago quarter. This drop was due to shipping disruption and the West Asia conflict.

Analysts have revised their forecasts in response to the margin pressure. Jefferies cut its target price for Maruti Suzuki to Rs 13,500 from Rs 16,500 and reduced its earnings per share estimates for FY27-29 by 7-11%. Nomura and Elara Capital also lowered their target prices and profit estimates.

The company's shares have fallen more than 31% in 2026 so far, trading at a 33% discount to their 52-week high.

Strategic response and market outlook

In response to these cost pressures, Maruti Suzuki will implement price increases. Hisashi Takeuchi said "the automaker plans to increase vehicle prices across its lineup over the next six months to offset higher input costs and protect operating margins."

Management provided strong guidance for the remainder of the fiscal year. They expect domestic volumes to grow at least 10% in the second half of FY27. Festive season sales have shown a 30% year-on-year increase since Onam. The company also continues to expand its model lineup, having launched the Wagon R FFV, its first flex-fuel model, in June.

For the first half of the fiscal year, total sales volume reached 1,379,378 units. This figure includes 1,146,523 domestic and 232,855 export units. The board has also approved the establishment of the Osamu Suzuki Centre of Excellence for vocational skills development. Management expects domestic volumes to grow at least 10% in H2 FY27.