Hyundai Q1 FY26 profit down 8.1% amid weak demand, macro headwinds

Business Standard

3 days ago

Hyundai Motor India Ltd (HMIL) on Wednesday reported an 8.1 per cent year-on-year decline in consolidated net profit to Rs 1,362.3 crore in the first quarter of FY26, impacted by sluggish domestic demand, weak hatchback sales, a tense geopolitical situation and macroeconomic uncertainty.
Hyundai also noted a structural shift in consumer preference towards compact SUVs over entry-level hatchbacks, which has affected segment volumes. Despite cost pressures, HMIL managed to maintain an EBITDA margin of 13.3 per cent, supported by a rise in exports, higher CNG penetration, and disciplined pricing.
'The prolonged softness in demand, driven by macro challenges and global uncertainties, continued to weigh on market sentiment,' said Unsoo Kim, managing director, HMIL.
'However, we remained focused on expanding our rural presence, updating our product line-up, and enhancing brand competitiveness,' he added.
Rural markets accounted for 23 per cent of Hyundai's domestic volumes during the quarter — the company's highest-ever rural penetration.
'The hatchback segment is shrinking — it has dropped from 46 per cent of the passenger vehicle market in FY21 to just 21 per cent in Q1,' said Tarun Garg, chief operating officer, HMIL.
'What we're seeing is a clear shift. Instead of small cars, buyers are opting for entry-level SUVs like the Exter. These offer better space, stronger road presence, and align with evolving customer aspirations,' he noted.
Garg added that the share of first-time buyers in Hyundai's sales continues to rise, and the contribution of SUVs in rural areas also mirrors the national trend. 'Even in rural markets, SUVs account for 68 per cent of our sales. The myth that rural customers prefer only small cars is changing.'
Hyundai's discount levels during the quarter stood at 3.4 per cent — below the industry average. 'We don't see discounts going up,' said Garg. 'In fact, depending on the festive momentum, they may hold or come down.'
Hyundai said that while macroeconomic concerns — including the Indo-Pak situation, the Iran-Israel conflict, and tariff uncertainties — had not directly impacted sales, the overall environment remained volatile.
He expressed optimism about the second half of the fiscal year. 'We are entering the festive season early this year, with Onam and Ganesh Chaturthi. The impact of recent RBI rate cuts and income tax relief will likely be visible in H2, as salaried customers plan their spending,' he said. 'Forty-four per cent of our buyers are salaried, and we expect the benefits to start reflecting in demand.'
On the export front, Hyundai saw a 13 per cent increase in volumes, with exports accounting for 27 per cent of its overall sales mix. The company said it has seen broad-based growth across emerging markets, reinforcing India's role as a global manufacturing hub.
'We are not facing any shortage of rare earth magnets,' said K S Hariharan, head of investor relations, HMIL, during the earnings conference call.
'We continue to work with our vendors to ensure supply continuity,' Hariharan added.
Hyundai has also commenced engine production at its newly acquired Pune facility, which will support both Pune and Chennai operations and improve production efficiency. The company will host its first Investor Day on October 15, where it plans to detail its product roadmap, including 26 new launches by FY30 and its strategy for powertrain diversification.
SUVs accounted for 68 per cent of Hyundai's total domestic sales during the quarter — significantly higher than the industry average of 54 per cent. The Creta retained its leadership in the mid-size SUV segment, supported in part by the introduction of its EV variant.