Maruti targets 10% growth in FY27 but margin pressure lingers, says RC Bhargava

Maruti Suzuki India Chairman RC Bhargava struck a cautiously optimistic tone in a wide-ranging interview with ET Now, estimating 10% volume growth for FY27, while acknowledging that margin recovery will be a more gradual and carefully managed affair.

Volume Growth: Maruti outperforms the industry

Bhargava was ambivalent about the growth. While the Society of Indian Automobile Manufacturers (SIAM) has guided for industry-wide growth of 5-7%, Maruti is targeting 10%, a figure driven by new production capacity rather than just demand assumptions.

The company has added one new production line each at its Kharghoda and Halipur plants. Together, these lines are expected to contribute approximately 250,000 additional units in FY27, with full capacity utilization reaching before the end of the year. “We cannot grow faster than that because there is no capacity to make more cars,” Bhargava said bluntly, a tacit acknowledgment that the constraint is supply, not demand.

Channel inventory is running low and order books are strong, both signs that consumer appetite for Maruti vehicles is healthy.

Rural demand leads the recovery

On the demand side, Bhargava points to the continuation of a trend that has emerged in recent years: rural markets are growing slightly faster than urban markets. First-time buyer activity is also on the rise, signaling a recovery at the entry level – a segment dominated by Maruti. This rural-led demand recovery adds a level of resilience to the growth outlook that relies less on discretionary urban spending.

Margins: No quick fix

The insidious story is the margin. Commodity inflation, particularly in steel and precious metals, reduced margins in the most recent quarter. Bhargava was careful not to promise a quick recovery, and clarified that Maruti would not automatically pass on the increase in input costs to customers.

“Whenever commodity prices go up, if we raise prices, prices will always go up – because when commodity prices go down, nobody lowers prices.” Balancing the need to protect margins against the risk of reduced demand, the company will assess the overall market situation before deciding on any price revisions.

With global commodity prices largely driven by factors beyond Maruti’s control, including the ongoing Iran conflict and its impact on shipping and input costs, Bhargava admitted that precise forecasting is not possible.

Exports: Stable at 4 lakh units

On exports, Bhargava maintained a target of around four lakh units for FY27, compared to 4.47 lakh units achieved in FY26. While some geographies, such as South Africa, pose logistical challenges, new markets are opening up and fresh free trade agreements are creating increasing opportunities. He suggested that the net picture is one of stability rather than growth or decline.

Fuel mix and energy wildcard

Asked about the impact of the global energy crisis on fuel choices, Bhargava noted that CNG vehicles are steadily gaining popularity. However, he warned that the crisis is affecting all types of fuel – petrol, diesel and CNG alike – through shipping bottlenecks and supply uncertainty. Whether the disruption is short-, medium-, or long-term remains unclear. On mark-to-market losses in other income, he was reassuring: these are accounting entries on securities held to maturity and should be treated as one-offs.

Bottom Line: Maruti enters FY27 with its strongest capacity position in years, a loyal rural buyer base and an export portfolio that is holding its ground. The variables, commodity costs, energy prices and geopolitical spillovers, are real but manageable. Volume growth looks credible for investors. Margin expansion will take longer and is highly dependent on how global headwinds develop.