Any guidance on timing of these launches during the year? March-volume annualization implies 10%+ domestic growth - are you not building much volumes from these models into your 8-10% guidance?
I think we have given enough guidance on this. I can only say that April volumes were already up 17%. The geopolitical situation is very fluid. We still don't know about what will happen in the Iran war. We are very agile and very flexible. The volume from these two models is going to be substantial. It is not going to be like very small. It is going to be substantial even in this fiscal.
Clarification on product launch disclosures - substantial volume accretion this year from 2 new launches: are they pre-festive season? Now that there are 2 launches this year, is it fair to assume MPV and off-roaders are FY29/FY30 launch cycle?
I am not commenting, you are not luring me into any further disclosures. Two new nameplates in this fiscal is what we are sticking to. Both will be SUVs - one ICE, one EV. The ICE one will be in the mid-SUV, EV will be in the compact SUV and it will be a dedicated EV. Both will have substantial volumes. I don't have anything to add further, and we are sticking strongly to our Investor Day commitments.
On margins - 2-wheeler makers have indicated commodity inflation could be 300-400bps headwinds in upcoming quarters. Is that range similar for the car industry as a gross headwind on the commodity front?
It is very difficult to quantify how much commodity will increase because it is highly volatile right now. But in near term, some pressure is expected. We manage through (1) cost reduction efforts with localization and other activities, (2) calibrated price increases - one more to come in May. These should take care of profitability. Our strategy is to take a proper balance between volumes and profitability. The price increase will be a calibrated call based on market conditions.
On CAFÉ norms - can you share more about the new EV model? Compact SUV - does it comfortably put us in CAFÉ compliance? What EV share within portfolio is needed over 3-5 years to be compliant? Is this the volume model for us?
Like we said, it is Hyundai's first mass market dedicated EV. Designed and made keeping India in mind. It is going to come this fiscal much before CAFÉ 3 norms kick-in, and we expect it to be in a high-volume segment. It will be a big booster from CAFÉ viewpoint, but CAFÉ is not only about one model and EVs. We have a very robust and comprehensive plan for CAFÉ. We are very clearly making a disclosure that we are very confident about meeting CAFÉ 3. We will be talking more about these new launches as we go along - we do not want to tell everything today because we have to build the excitement.
Follow-up on profitability - 11% to 14% range as this mass EV volume model comes through. Does that have any bearing on margin near-term? This won't be as profitable as the rest of the portfolio. How do we think about ramp-up in context of overall portfolio margin?
When the 11% to 14% range was guided, it considers all the new models across all segments - whether EV, petrol, hybrid, diesel, SUV or small car. Trust us, we have done our calculations. Beyond this, model profitability will be very difficult to give more details. We have been very responsible in our margin guidance. That is why you see it's a broad range of 11% to 14% guidance. We are very confident that we will achieve this.
On the e-SUV - is this the product on which you would be embarking on the cell localization project where Hyundai Group has tied up with a local player?
For today, the disclosures have already been made. Please wait for more announcements on this.
On exports guidance of 8-10% growth - previously capacity was a constraint but now your capacity has increased significantly. What's the underlying basis for 8-10% growth? Are you pricing in current adverse geopolitics, or is 8-10% an intended growth?
The overall situation is quite dynamic. Our Middle East volumes have been impacted in the last quarter, especially in March. Near term we are looking at some challenges, especially for Middle East. We are also looking at alternate options in terms of alternate shipping routes. As mentioned earlier, there are a lot of other options in terms of other markets and the product strategy as well. Collectively these things should help us achieve this 8-10% growth.
On margins: we are at about 10.5% currently and guiding 11% to 14%. There seems to be further commodity pressure - what are the margin levers from here? Also, how much commodity pressure did we face in Q4 and what is the pricing action taken?
On commodity, last quarter the impact on margins was roughly 120 basis points sequentially. Out of that 120bps, roughly 50 to 60 basis points would be a one-off that might not recur in upcoming quarters. We took a price increase of 60bps in January, a selective Venue price increase in March, and we will be doing one more price increase in May. Near-term commodity headwinds are expected to continue. Positive levers for FY27: (1) volume growth 8-10% domestic and export, (2) multiple price increases, (3) Chennai plant utilization improvement as the two upcoming model launches are both from Chennai, (4) one-offs in commodity and Labor Code should not repeat, (5) continued localization and value engineering cost optimization. These factors give confidence to deliver margins within 11% to 14% in the upcoming year.
On growth guidance - exports exposure to Middle East is high yet you guide for 10% growth. For domestic 8-10%, will you gain market share given the new launches?
On exports, since the war started, Middle East exports have taken a hit but we are taking countermeasures. We have aggressively focused on other markets like Latin America, Mexico (shipments increased last quarter). We are continuously strengthening product offerings - new Venue, Verna PE, Exter PE, LHD version of Exter, and the two new nameplates also for export in due course. Demand has been pretty strong and healthy across markets. Even in Middle East we have a healthy back order. That confidence supports the 8-10% export guide for FY27 in an uncertain environment.
Follow-up on domestic 8-10% growth and market share.
On domestic, CRISIL and ICRA forecast 3-5% or 4-6% growth for this fiscal. We believe 8-10% growth for us. If any further opportunity comes, we will be very quick and agile to grab it with our capacity and new models. We are fairly confident we will outpace the industry in this fiscal and gain market share.
Two heavily localized nameplate launches in one year - in the October presentation, two launches were planned over FY27 and FY28. Are these the two new nameplates? Will we be done for 2 years with this?
You have a sharp memory. We are exactly sticking to our guidance. In this fiscal we launched one full model change (Venue), one derivative (Venue N Line), two facelifts (Exter and Verna), exactly as per plans. Over the next 2 years, we had guided for three full model changes, two new models. We are going exactly as per our plans. If more opportunities come, we will look at it. We stand heavily committed to whatever we had told.
On the capex of INR 7,500 crores, can you please indicate the areas and indicate a broad breakdown?
Out of this INR 7,500 crore, a major part around 45% to 50% would go into the upcoming new products. Around 30% will go into plant-related investments - some portion for the Phase 2 expansion in Pune and some for upgradation of the Chennai plant as well. That is the broader plan.
On the one-offs - can you quantify them? On a Q-o-Q basis, employee cost is up 34% - what should be the sustainable number? Also 50-60bps within commodity not likely to recur - what does that relate to?
On employee cost, we have seen sequential increase of nearly INR 100 crores. A large part relates to Labor Code provisions impact and some accounting impact relating to actuarial provisions - some assumptions revisited. A major part is one-off, should not ideally repeat next quarter. On commodity, the one-off relates to vendor compensation for the past period.
Almost 90 sales outlets added this year - how has the focus on rural been, and how do you target network increase going forward?
We are going very strong on network expansion. Almost 7 out of 10 outlets are coming in rural areas. Rural penetration continues to increase - Quarter 1 was 22.6%, Quarter 2 23.6%, Quarter 3 24.1%, Quarter 4 a historic high of 24.7%. Urban also started growing - first two quarters urban was negative, Q3 +1%, Q4 +7%. Post-GST, rural opportunities are very strong supported by our network and 30-year celebration marketing. Our focus continues for the next couple of years in a 7:3 rural-urban outlet ratio.
Three quarters back you disclosed close to 113 grams/km CO2 in 1Q. How did you end FY '26 on CAFÉ 2 and what targets for FY '27?
CAFÉ 2, the target was 117.585 grams. We ended with 114.49 grams. This is minus 3.095 grams - we are much better than the target. This is as per our internal calculation. We are very confident about CAFÉ 3. Based on the draft and considering our powertrain plan, we are very confident that we are going to meet CAFÉ 3 as well.
On margin: discounts for this quarter, and where are we on new plant-related costs? There was supposed to be 30-40bps of impact to come this quarter - is it fully reflected?
On discounts, this quarter we reduced discount substantially. In Q3, discount was 2.6% on ASP. In Q4, it reduced to 1.9%. On Pune cost, overhead cost and depreciation have an impact - as we ramp up there will be some increase in these cost elements. But we are increasing volumes too. Venue producing from Pune already seeing strong domestic traction. Export opportunities being explored for new Venue. Collectively increased volumes should help absorb fixed costs and improve margins.
From a depreciation perspective, is that fully reflected this quarter or could there be more increase to show up?
The major impact was already reflected in third quarter. Whenever we do ramp-up, there will be some increase in cost elements. However, the volumes should take care of all these increased costs.
Both these products will be in Chennai plant. Given Pune still has capacity ramp-up to happen and as of now we only know about the Venue, how does the overall utilization and fixed cost absorption work? We thought these may be coming from Pune.
It works beautifully because, frankly, in 2 shifts, Pune plant cannot do much more than the current level of 130,000-140,000 units. We started with 8,000 per month and have already moved to 12,000 per month. Pune on 3-shift is about 170,000. Unless we add a shift to Pune, how much more can you do. Chennai provides a great opportunity - one good reason for our strong profitability in past years was 90-95% capacity utilization in Chennai. Now because Venue shifted to Pune, there is a temporary drop in capacity utilization. The two upcoming models from Chennai will improve utilisation. We will look at the third shift in Pune as well if volumes are enough to support.
On PBT bridge - Q-o-Q (Q4 over Q3), you mentioned volume and mix was slightly positive. But mix was significantly adverse - exports were lower, SUV mix was lower. So is volume a bigger driver than mix?
Yes. That's the broader understanding. We had better volumes, especially in the domestic market. So that has really helped us on a sequential basis.
On the 70,000 incremental capacity expansion in Pune post Phase 2 - what is the timeline? Will it be FY'30? Considering current capacity itself is fairly high, what is the driving factor behind this significant capacity expansion beyond Phase 2?
Phase-1 of 170,000 units is already done. Phase-2 of 80,000 units will come in 2028, bringing it to 250,000 units at Pune. Then the balance addition of 70,000 will come between '28 and '30 which will take Pune capacity to 320,000. The driving force behind this is the addition of more models - presently only one model, then the second model and beyond. No more disclosures for today.