January 14, 2026
HDFC Securities, in its Autos Q3FY26 Results Preview dated January 13, 2026, expects operating leverage and up-trading trends to aid margins across the Indian automobile sector during the December quarter, even as raw material inflation persists .
Demand Trends and Macro Backdrop
According to HDFC Securities, demand has begun normalising after the festive season but remains higher than levels seen before GST rate rationalisation. From a Q3FY26 earnings perspective, the brokerage notes the possibility of a positive surprise in realisations and margins, driven by improved variant mix and up-trading.The report highlights favourable macro conditions, including lower interest rates, benign inflation, lower income tax rates, a good kharif harvest, and higher rabi sowing, which are expected to support demand into Q4FY26. A depreciating rupee against the US dollar and euro is cited as beneficial for companies with a strong export mix, while adversely impacting tyre manufacturers due to rubber imports and electric vehicle manufacturers because of imported battery cells.
Raw Material Inflation Continues
HDFC Securities notes continued inflation in key raw materials, including aluminium, copper, platinum group metals, and steel. Steel prices have risen following the implementation of a three-year safeguard duty. The report states that some OEMs are in a wait-and-watch mode on price hikes, opting instead to reduce discounts to partially offset higher input costs. As a result, the net benefit of GST rate rationalisation is expected to be partially eroded, making medium-term demand visibility case-specific.Passenger Vehicles Remain Better Placed
The passenger vehicle segment is viewed more positively by HDFC Securities, supported by faster product refreshes, new launches, advanced feature additions, and a wider variant spread enabling near-customised offerings. Improving road infrastructure and the implementation of the 8th Pay Commission, under which government employees and pensioners are expected to receive arrears, are highlighted as additional demand drivers.Maruti Suzuki continues to be a preferred company within the segment. However, the report flags easing trade tensions between India and China and expectations of an India–EU free trade agreement as potential risks, which could lead to easier access for Chinese and European OEMs to the Indian auto market.
Auto Ancillaries Face Global Headwinds
HDFC Securities points out that global demand remains soft for auto ancillary companies, with tariff uncertainty impacting medium- to long-term planning. While tyre manufacturers could benefit from lower raw material costs, higher OEM demand, and increased road freight movement, companies such as Endurance Technologies and Motherson Sumi Wiring are expected to face margin pressure due to higher aluminium and copper prices, respectively. Ramp-up of plant operations on a quarter-on-quarter basis is expected to help ease margin pressure for select players.Q3FY26 Company Estimates
HDFC Securities has provided Q3FY26 estimates for key OEMs and ancillary companies:- Maruti Suzuki is estimated to report Q3FY26 revenue of ₹5,08,396 crore, reflecting 32.1 percent year-on-year growth and 20.8 percent quarter-on-quarter growth. EBITDA margin is expected to improve 108 basis points QoQ to 11.6 percent, while PAT is projected to rise 26.9 percent YoY.
- Ashok Leyland is expected to post Q3FY26 revenue of ₹1,13,618 crore, with EBITDA margin improving 114 basis points QoQ to 13.3 percent and PAT growth of 30.7 percent YoY.
- Bajaj Auto is projected to record Q3FY26 revenue of ₹1,56,083 crore, EBITDA margin of 20.8 percent, and PAT growth of 24.0 percent YoY.
- Hero MotoCorp is estimated to report Q3FY26 revenue of ₹1,22,673 crore, with EBITDA margin of 14.9 percent and PAT growth of 16.7 percent YoY.
- Apollo Tyres is expected to report Q3FY26 revenue of ₹74,223 crore, with EBITDA margin improving 45 basis points QoQ to 15.4 percent.
- Endurance Technologies is projected to post Q3FY26 revenue of ₹34,939 crore, with EBITDA margin declining 45 basis points QoQ due to higher aluminium prices.
Ratings and Preferred Picks
HDFC Securities has identified Ather Energy, Maruti Suzuki, and Hero MotoCorp as its top picks within the sector. As of January 12, 2026, BUY ratings are maintained on Maruti Suzuki, Hero MotoCorp, Bharat Forge, and Ather Energy, while REDUCE ratings are assigned to Hyundai Motor India and Tata Motors PV. SELL ratings are maintained on Apollo Tyres and Balkrishna Industries .Source:
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