Hyundai Motor India (HMIL) has reported a 14.3% year-on-year increase in net profit for the second quarter of fiscal year 2026, reaching ₹1,572.25 crore. This growth is attributed to a surge in exports, cost reduction initiatives, and a favorable product mix, particularly the strong performance of SUV sales.

Export Surge Offsets Domestic Sales Dip

While domestic sales saw a decrease of 6.8% year-on-year to 139,521 units, a substantial 21.5% increase in exports, totaling 51,400 units, significantly contributed to the company's bottom line. HMIL's Managing Director, Unsoo Kim, expressed optimism about exceeding the company's export targets for FY26, with the Middle East and Africa showing remarkable volume growth of 35%, and Mexico recording an 11% increase. Exports accounted for 27% of overall sales volumes. The company aims to make India its global export hub, targeting 30% of local production for overseas markets by 2030.

Improved Margins and Cost Optimization

The company's total income saw a marginal increase of 1.4% year-on-year to ₹17,692 crore. However, Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) rose by 10.1% year-on-year to ₹2,428.93 crore, with EBITDA margin improving by 113 basis points to 13.91%. This improvement reflects a healthier product mix and cost optimization efforts. K S Hariharan, head of investor relations at HMIL, noted that export margins are better than domestic margins, further supporting the company's profitability. The company also implemented value engineering and other initiatives to reduce material costs.

SUV Sales and Rural Market Growth

SUVs contributed a record 71.1% to Hyundai's domestic sales, highlighting the increasing popularity of these vehicles in the Indian market. Rural markets also accounted for their highest-ever share at 23.6%.

Industry Context and Future Outlook

Hyundai faced pressure from slowing domestic demand, mirroring a broader industry trend. However, a recent government tax cut is expected to revive demand across the board. Hyundai's growing dependence on its Creta SUV has made it vulnerable to competition in the domestic market. The company has announced a $5 billion investment plan over five years, aimed at expanding its India portfolio with hybrid models, electric vehicles, and the launch of its luxury brand Genesis.

Impact of Steel Prices

While not explicitly stated in all reports, the decline in domestic steel prices may have contributed to Hyundai's cost reduction initiatives. Domestic steel prices have hit a five-year low due to rising imports, weak export demand, and global oversupply. Lower steel prices could have eased the burden of raw material costs for Hyundai, further boosting their margins.

In summary, Hyundai Motor India's strong Q2 FY26 performance was driven by a combination of increased exports, cost optimization, and a favorable product mix. While domestic sales faced challenges, the company's focus on exports and strategic initiatives have enabled it to achieve better-than-expected profits and margins.