Maruti Suzuki

The Indian government's historic GST reform announced on August 15, 2025, reduced taxes on passenger vehicles by approximately 5-10% in a single stroke. This triggered a dramatic reversal in industry growth — from -0.4% in H1 FY26 to +20.5% in Q3 FY26. Maruti Suzuki, as the market leader with the broadest portfolio spanning mass-market to premium SUVs, was a primary beneficiary. Domestic volume growth swung from -5.8% in H1 to +22% in Q3. The small car segment in the 18% GST bracket was the primary growth driver, and first-time buyer penetration increased by ~7 percentage points (from ~40% to ~47%), with management citing anecdotal evidence of 2-wheeler owners upgrading to cars. Management characterized the GST reform as having 'not only boosted consumption but also accelerated private capex,' prompting Maruti to accelerate its own capacity expansion plans.

Maruti achieved its highest-ever quarterly Net Sales of ~INR 475 billion (up 29.1% YoY) and highest-ever retail sales of ~684,000 units. However, the company ended Q3 with an unprecedented^🌐ly low network inventory of just 3-4 days, alongside a pending order book of ~175,000 vehicles. Management stated the company 'had to work on Sundays and holidays to meet demand' and is 'constrained by supplies.' This supply constraint means the wholesale numbers may not reflect true demand. Factory inventory depletion also caused a 50 bps unfavourable fixed cost incidence impact on margins, which should mathematically reverse as inventory is rebuilt.

Sequential EBIT margin declined from 8.4% to 8.1% despite massive volume growth, due to multiple headwinds: (1) Commodity costs +60 bps (PGM, aluminium, copper — PGM is ~2% of vehicle net sales); (2) Rare earth supply disruption +20 bps (forced to import larger sub-assemblies and incur air freight); (3) Fixed cost incidence +50 bps from inventory depletion; (4) Forex +15 bps flowing through raw materials; (5) Price reductions +70 bps in select models post-GST; (6) Labour code provision +125 bps (one-time^📎 INR 5.94 billion). Offsetting positives: Operating leverage -190 bps from volume surge, and lower discounts + favourable mix -120 bps. Excluding the one-time^📎 labour code provision, underlying EBIT margin would have been ~9.3%, showing genuine operating improvement.

Maruti is executing one of its most aggressive capacity expansion phases. The second plant at Kharkhoda is scheduled to be operational by April 2026 (250,000 units/year capacity). Shortly after, the D-line (4th line) at the Gujarat facility (erstwhile SMG, now amalgamated) will also be commissioned with another 250,000 units/year capacity. This adds 500,000 units of annual capacity in a short timeframe. Additionally, Maruti announced plans for a second greenfield manufacturing facility in Gujarat. Current capex run rate is ~INR 12,000 crores for FY26, with an ongoing run rate of ~INR 10,000 crores/year. Management emphasized 'there is no dearth of funds' and 'if the customer wants, we shouldn't be found lacking.'

Suzuki Motor Gujarat (SMG), a wholly-owned subsidiary, amalgamated with MSIL effective December 1, 2025 (appointed date April 1, 2025). All comparable financials have been restated per Ind AS. Key accounting changes: (1) Material costs now reflect only component costs of Gujarat-manufactured vehicles (previously included employee costs and overheads of SMG); (2) Depreciation of Gujarat facility moved from lease rent (other expenses) to depreciation line — approximately INR 700 crores quarterly shift; (3) Employee costs and overheads moved to their natural heads. Net impact: EBITDA adjusted upwards, but EBIT level impact is negligible. No impact on consolidated results.

Maruti commanded ~46% share of India's PV exports in CY25 and is on track for ~400,000 units of exports in FY26. Q3 export growth was soft (low single-digit YoY) due to a logistical one-off^📎 (missed shipment). The e VITARA, Maruti's first EV, has been exported to 29 of a planned 100+ countries with 13,000+ units shipped by December 2025, running at ~2,500 units/month. UK is the top destination. The Jimny 5-door crossed 100,000 cumulative exports. Management highlighted potential risks from South Africa duties and global trade tensions but emphasized diversification across 100+ markets as a de-risking strategy. The EU/UK FTA preliminary details appear positive, with car imports opened only above EUR 15,000 CIF, which management views as calibrated and sensitive to domestic industry.

In a notable strategic stance, Maruti has chosen not to take any price hikes following the GST reform, despite facing commodity headwinds. Management stated it is 'not ethical to have a price increase immediately after the government reduces taxes' and that the company wants to 'build momentum' rather than recover costs immediately. Price reductions were offered in select mini-segment models and committed at least through end January 2026. Management acknowledged that 'we always have time ahead of us where, if we have cost pressures, we can recover that from the market.' This pro-consumer positioning, while potentially compressing near-term margins, aims to maximize the structural demand opportunity created by the GST reform.

Management firmly denied any delays in EV rollout. The e VITARA secured a 5-star Bharat NCAP rating and domestic launch is imminent. The company has established 2,000 exclusive charging points across 1,100 cities and partnered with 13 charge point operators. The ambitious target is to enable 100,000 charging points across India by 2030. Management noted that the ICE demand surge post-GST does not conflict with EV growth, pointing to government support via PLI and incentive schemes. Multiple EV launches are planned aligned with Suzuki's global vision, though specific India timelines and volume targets beyond e VITARA were not disclosed.