New Delhi [India], July 12 (ANI): India's auto original equipment manufacturers (OEMs) are likely to witness margin pressures in Q1FY26E, impacted by higher raw material (RM) costs and operating deleverage, according to a report by HDFC Securities.

The report added that elevated prices of key inputs, particularly steel and platinum group metals, are expected to weigh on gross margins, while lower seasonal volumes may further strain EBITDA margins.

For two-wheeler (2W) OEMs, an adverse domestic product mix, weaker export contribution, and lower electric vehicle (EV) mix have added to the challenges.

The report added that minor pricing revisions are expected across two-vehicles (2W) and commercial vehicle (CV) players, triggered by the implementation of new regulations--OBD 2 norms from April 1, 2025 for 2Ws and AC cabin norms from June 8, 2025 for CVs.

The report added that auto ancillary companies are also under pressure, with subdued global demand and tariff uncertainty clouding long-term planning.

Tyre makers may get some relief from lower raw material prices, while some players could benefit from a drop in aluminium costs, the report added. However, export-focused firms face risks from rising ocean freight costs and potential disruptions. Delays in the return of migrant labourers could further impact operations, the report stated.

Adding to the sector's concerns is an imminent shortage of rare-earth magnets, essential for both EV and ICE vehicle components. With most global processing concentrated in China due to its radioactive and high-cost nature, alternatives like domestic production or sourcing from Japan remain long-term prospects.

In the near term, importing fully assembled components from China may be the only viable solution, though this would raise costs, reduce localisation, and potentially affect PLI eligibility, as per the report.(ANI)