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What growth did Hyundai register in wholesale and retail in the festive season and how are you thinking about momentum post-festive season and the balance of the fiscal year?

If you see the festive season, we count the festive season from 1st Navaratri to Diwali, which was 22nd September to 23 rd October, which was the end of Bhai Dooj. So, retails actually grew by 23%. When we do a deep dive into which segments, Hatch segments grew by 16%, Sedan grew by 47%, SUVs grew by 21%. More importantly, Exter plus Venue grew by 28%. So, in the festive season, we very clearly saw that Exter and Venue grew. At the same time, as you know, Venue was seeing this transformation from old to new. We had some limitation in terms of the old Venue stock, so we lost out on that, but very clearly, the festive and the GST is giving a big impetus to the Venue and Exter segment and the 4th November launch of Venue should help. The other way to look at it is, how does September plus October retail compare to January to August? When we see that, the growth was about 21%, Hatch is 24%, Sedan 14%, SUV is 21%, and Exter plus Venue again 27%. So, a very strong growth registered in the festive season as well as in the September and October versus January to August.

We are pretty close to the upper end of the margin guidance. Why has management been conservative in giving margin guidance for the future? Are there company-specific or industry-specific factors? Can you also give a breakdown on commodity costs and discounts for the quarter?

On the margin front, this quarter, once again, we delivered a strong performance. But we need to understand that with the start of production at Pune plant, obviously, we are looking at some incremental costs, especially in terms of depreciation, labor costs and factory overheads. So, these elements will have some pressure on the margins for some time in the initial period, but as we move forward, we are expecting to ramp-up our production and the sales volumes. We have already indicated we are also looking at exports as a very good opportunity in the future. So, all these things should definitely support us to secure healthy margins going forward. On the commodity, as you asked, we had pressure in some of the items during the quarter. However, we have been doing cost optimization efforts through our localization and value engineering activities. So, these efforts have helped us to keep the material cost under check during the quarter. On the discount part, sequentially, if you look at, we have seen some moderation in the discounts. Especially if you see domestic, our discount during the quarter was 3.2% of ASP. This is despite the market condition, as you already know, the industry has been giving further price cuts over and above the GST cuts. But we were able to follow a disciplined approach on the discounting front.

On the continuous improvement in material costs and localization - how are you able to drive gross margin improvement and how should we think about material cost savings going forward over 1-2 years?

Material is something where clearly we have done a lot of activities. In fact, if you look at this quarter, we have seen 110 basis points improvement on the profitability, mainly supported by material cost reduction. What we are doing is, one is the localization. As you know, last time also we indicated, for the year before last year, our localization level was somewhere around 78%. Today, we stand somewhere around 82%. Second thing is that, it is not only Tier 1 level, we are also looking at Tier 2 level as a potential opportunity for improving the localization. Apart from localization, we also do a lot of value engineering activities. That also helps us with some cost reduction.

Your localization is currently 82%. Over the next 4-8 quarters, is it possible to reach 85% or even higher? What was the royalty number for the quarter?

With a strong, dedicated localization team, we are co-working with all of our stakeholders, including the HMC headquarters and HMIE R&D. So, our aim is to reach 90% by FY'30. Our focus is on high technology parts. For example, electrical sensors, hardwares, premium car parts and electronic parts. And going forward, we're also looking for deep localization till Tier 3. On the question of royalty, during the quarter, royalty was 2.8%.

What is your view on the Nexperia e-component issue? Is this a possible impediment to growth or disruption in production?

If you look at Nexperia, the e-component issue, it is an industry-wide issue. There is no doubt. As far as HMI is concerned, we are constantly monitoring the inventory situation. We are also closely working with our vendor partners to mitigate this impact so that we can have uninterrupted production. As of now, we are not facing much challenges because we have some inventory for near-term. But this will be a continuous process for us to review and align our countermeasures so that we can have seamless production operations.

On the export part - given where export trends have been in the first half, what would be the guidance for the full year FY26?

Exports have been quite strong for us in recent times. So Q2, as we had indicated, we grew by nearly 22% on the export side. The momentum is good. In fact, we are seeing very strong demand for our products across regions. Middle East and Africa, we have seen growth of 35%. Mexico has grown by 11%. This momentum should continue for us in the near term. Though it is difficult to give specific volume guidance, but what we believe is that, by the end of this financial year, we will be in a position to exceed the guidance we had originally indicated during the beginning of the year. Yes. W indicated 7% to 8% originally, if you remember. We expect that we will be in a position to exceed that number.

Discounts are trending down. How do you expect that trend to play out for the domestic market into the December quarter?

We have maintained that we believe in quality of sales. There are definite tailwinds in terms of industry tailwinds, especially the GST. Of course, there are headwinds for the industry. We believe that this is probably the maximum discount level. The new Venue is being launched on the 4th of November, which should help us to reduce discounts. At the same time, we will need to be very watchful going forward how the industry landscape is panning out and how we are able to have a good balance between volume and profit. But yes, it seems that the discounts for us have peaked out.

Clarification on constrained availability of Venue - where is channel inventory right now? The festive sales numbers don't seem similar to Vahan data.

You have to just understand that because 15th August to 22nd September, nobody could wholesale, nobody could retail. So, everything got piled up. Normally there is not so much of a difference between Vahan and retail and wholesale. But because of all this piling up, what happened was there's a logistic challenge, there's a capacity challenge, retail challenge. So, my point is that we need to be slightly patient. I believe that this lag between Vahan and retail will continue for probably one more month. And only at the end of November, we will know what was the actual situation. This is a very unique situation where for 37 days, basically customers postponed the purchase. And then everybody wanted a car suddenly. The second is on the Venue. We are more or less done with the old Venue stock. So, hardly we have any vehicles, a few hundred vehicles in the factory and a couple of thousand vehicles in the network. But we believe this is a short-term pain for long-term gain, because the new Venue is coming in full force on the 4th of November.

On channel inventory overall - is it fair to assume overall inventory is very low for the rest of the models?

Yes. If you see the last 6 months inventory, the channel inventory was about 5 weeks. Now we are running at about 3 - 3.5 weeks of channel inventory, including transit. So, yes, the channel inventory has come down. But this is very normal. I mean, after every festival, the channel inventory comes down. Before every festival, the channel inventory is high. So, I don't read too much into it, but it is always healthy when the channel inventory comes down, which means there is hunger in the system to take more.

Any change in customer behavior post-GST cut - improvement in share of first-time buyers or variant upgrades? What will be the share of first-time buyers for Hyundai?

If you see, yesterday I think there's an independent survey which was conducted by a news agency, PTI. 80% of the car buyers post-GST survey said that they use tax relief to switch to a better model, brand, or premium add-ons during the festive season post-GST 2.0 implementation. The report also suggests that SUVs remain the most popular choice amongst the buyers. Also, more than 60% of buyers plan to upgrade to higher variants within the same brand. And 46% have already shifted from hatchbacks to SUVs. This is an independent third-party report. I already shared that for Hyundai, very clearly, Venue and Exter look to be the maximum gainers from this GST shift. But if you talk about first-time buyers, I think it's too early. It's only 37 days. But generally, the first-time buyers for Hyundai have increased from 29% five years back to about 40% now. We continue to see great traction for the first-time buyers, which is very good. Because if you see from an ASP perspective, it is going up for Hyundai. From an SUVization perspective, it is going up for Hyundai.

There is an increase in other operating income by 31% QoQ to ₹305 crore. Can you indicate if it includes any state government incentive and will it continue going forward?

Raghu, if you look at sequential basis, the increase is mainly due to two reasons. One is we have seen sequential growth in export volumes. So that gives us better duty drawback and other export incentives. Second thing is, the Tamil Nadu incentive. The MOU incentive normally accrues for us from the mid of August or end of August like that. So, that is also another reason for the increase in this other operating revenue. Going forward, of course, the Tamil Nadu incentive will continue. We also, will be accruing the Maharashtra incentive from the month of October.

Given the very high capex planned on R&D as stated in the investor day, what are the kinds of capabilities Hyundai Motor India will build over the longer term? What kind of global capabilities does it give for export market as well?

The mid-term guidance what we have given is ₹45,000 crores. First of all, we need to understand the major activities where we are planning to spend this. One is, out of this ₹45,000 crores, 40% would be for product-related investments. When I say product, it is basically for the 26 launches over the next five years. So, that will obviously require investment into fixed assets like moulds, dies, etc. That is one. Another 40% would include mainly capacity expansion, localization, systemization, and other similar activities. So, this is a broad picture I wanted to share why we are investing all this money. We are looking at a good amount of growth, whatever we had indicated in terms of volume projection, market share, and profitability. So, all these things are linked to the investment as well.