Auto Ancillaries Show Resilient Growth Amid Rising Input Costs

In FY26, auto ancillaries posted a 12.5% revenue increase driven by strong volume growth and improved product mix. Despite a flat operating margin, EBITDA rose by 13.3%. The report predicts a positive demand outlook for FY27 but warns of near-term challenges due to rising input costs.

In the fiscal year 2026, the auto ancillary sector displayed robust growth as revenue surged by 12.5% year-on-year, attributed to strong volume expansion across various segments and an enhanced product mix. A report from Elara Capital highlights this revenue boost, which was paralleled by a 13.3% increase in absolute EBITDA, though operating margins remained steady at 13.6%.

The analysis, which covered 59 listed auto component manufacturers, revealed that 25 companies experienced a contraction in their operating margins. Segment-wise, suspension braking and multiproducts were at the forefront of revenue growth, showcasing year-on-year increases of 16% and 15% respectively. Tyres, lighting, and suspension categories excelled in profitability with a 17% EBITDA growth, while forgings and batteries saw declines of 4% and 1%, respectively.

The demand outlook for FY27 is optimistic, driven by sustained momentum in the two-wheeler, passenger vehicle, commercial vehicle, tractors, and replacement markets in India. However, the report cautions about operational challenges as input costs soar, highlighting commodity inflation as a significant short-term hurdle. Despite operational pass-through mechanisms, the lag in cost recovery continues to exert pressure on margins.