New Delhi [India], January 7 : India's automobile sector is set to deliver one of its strongest quarterly performances in years in Q3FY26, with robust demand growth coinciding with a sharp improvement in profitability across segments, according to a sector preview by Nuvama Institutional Equities.
Aggregate revenue for listed auto companies under coverage (excluding Tata Motors PV) is expected to rise about 22% year-on-year, while EBITDA is forecast to grow faster at 24%, signalling a rare phase where volumes, pricing and operating leverage are all working in tandem.
Analysts attribute the strong showing to improving affordability, supported by GST rate cuts, lower interest rates and adequate financing availability, alongside a healthy pipeline of new launches. Customer sentiment remains positive across categories, helping sustain demand momentum through the quarter.
Commercial vehicles and tractors are emerging as standout performers. Domestic CV volumes are estimated to have grown around 21% YoY, aided by stronger transporter sentiment, better freight availability and a revival in replacement demand after years of postponement. Tractor volumes surged 23% YoY, driven by state subsidies, resilient farm cash flows and healthy crop output, though analysts caution that growth may moderate in FY27 as the high base and subsidy rollbacks kick in.
The passenger vehicle segment continues to expand at a healthy pace, with domestic volumes up nearly 20% YoY, supported by improved product mix and electrification-led realisations. In two-wheelers, a long-awaited recovery is taking shape, with volumes rising 16% YoY, reflecting a rebound in mass-market demand as affordability improves.
From a profitability perspective, companies such as TVS Motor, Maruti Suzuki, Tata Motors CV, Mahindra & Mahindra and CEAT are expected to report strong EBITDA growth, benefitting from operating leverage and relatively benign currency movements. However, not all players will participate equally. Tata Motors' consolidated performance is likely to be weighed down by a sharp decline at Jaguar Land Rover following a cyberattack, despite robust growth in its India PV business.
The upbeat earnings outlook has prompted brokerages to raise target prices across much of the auto universe, rolling forward valuation horizons to FY28 and upgrading several stocks on improved risk-reward.
With most auto segments still in the midst of their upcycles rather than at peak levels, analysts believe the sector's momentum could extend beyond Q3--though selectivity will remain key as growth normalises in some pockets.