Hyundai India struggles to steer past margin woes

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Subscribe to enjoy similar stories. Hyundai Motor India Ltd’s lukewarm stock market debut in October was followed by an equally underwhelming maiden quarterly performance. A key disappointment was the 70-basis-point (bps) sequential drop in operating margin, which fell to 12.8% in the September quarter (Q2FY25).

Lower domestic and export volumes, coupled with higher discounts, weighed on profitability. The decline was exacerbated by a high base effect, as Hyundai’s Ebitda margin had peaked at 13.5% in Q1FY25—the highest in four years. Read this | Why Hyundai’s IPO may have disappointed and what’s next? In an effort to stimulate demand, Hyundai raised retail discounts by 40bps to 1.9% in Q2FY25.

However, this failed to boost sales volumes, which remained flat quarter-on-quarter, dragging margins lower. As a result, net profit fell nearly 8% sequentially to ₹1,376 crore in Q2FY25. A concern is that Hyundai’s profitability might remain under strain in Q3FY25 as well.

Deep discounts and subdued wholesale volumes could further squeeze Ebitda margin. While the management expects steady demand driven by higher SUV (sports utility vehicle) sales and the wedding season in November, weak industry-wide sales so far this month and continued reliance on discounts may pose significant challenges for Indian carmakers in the near to medium term. Auto companies typically increase their discounts on retail sales in Q3 to attract more customers during the festival season, while their wholesale volumes usually dip in December as dealerships tend to shun fresh stocks towards the end of the year.