Maruti Suzuki India Ltd’s latest management commentary has spurred hopes of brighter days after the September quarter (Q2FY26).

The company’s exports jumped 42% year-on-year, supporting overall Q2 growth even as domestic sales fell by 5% because customers deferred purchases since the goods and services tax (GST 2.0) announcement in August. But GST 2.0-powered festive sales since 22 September, when the new rates came into effect, promise to bring back volume growth. GST rates on small cars have been slashed from 29-31% (including cess) to 18% and this should bode well for India’s leading small car maker Maruti, whose shares are up 25% since mid-August.

Small cars rebound

Almost 50% of Maruti’s sales come from small cars, like the Alto K10 and WagonR. During the festive season from 22 September to 31 October, Maruti’s bookings reached 500,000 units versus 350,000 units in last year’s season, driven by a doubling of small car bookings. Retail sales rose 20% on-year in October, led by 30% growth in small cars. Even as festive demand subsides, the management expects tax cuts to help sustain double-digit growth in small cars over the medium term.

The GST push can also augment Maruti’s multi-year premium pivot, as the company has lost ground amid the Indian car market shifting towards utility vehicles (UVs). The company’s market share has shrunk from 50% in FY19 to 41% in FY25 despite a 67% share in small cars. Responding to the changed market dynamics, Maruti has doubled the share of UVs in its revenue mix—from 18% in FY21 to 36% in H1 FY26. A rising share of exports—from 7% to 19%—has also picked up some of the slack from small cars. Motilal Oswal Financial Services expects Maruti to deliver 17.5% earnings CAGR from FY25-28, driven by new launches and strong export growth.

Nine new UVs are lined up for launch by 2031, including its latest model, the Victoris, which has been assigned a five-star safety rating and has seen robust initial traction with about 30,000 bookings. Maruti’s export-focused models, the Fronx and the Jimny, have also been received positively. With 1,10,000 units exported in Q2, Maruti may well beat its FY26 guidance of 400,000 units.

Maruti’s EV ambitions should also boost growth and support margins. Over 7,000 units of E-Vitara have been exported so far, and six new EVs are in the pipeline for FY31. Domestically, Toyota’s hybrid technology and factory-fitted CNG options give Maruti an edge until EVs become mainstream. As per Motilal, Maruti would be the key beneficiary of any favourable policy for hybrids by the government.

Meanwhile, muted Q2FY26 domestic sales meant Maruti’s total sales volume growth was sub-2% year-on-year, although higher realizations on an improved mix led to 13% revenue growth. However, Ebitda was flattish at ₹4,430 crore, with margin contracting from 11.8% to 10.5% on higher raw-material and promotional expenses. Higher depreciation on the new Kharkhoda plant meant a larger 180 basis points compression in Ebit margin to 8.5%. The management remains committed to a long-term Ebit margin guidance of 10% on the back of the rising premium mix.

Maruti’s shares are now near their 52-week high of ₹16,660 apiece seen on 23 October. PL Capital has retained its ‘Hold’ rating on the stock with a target price of ₹16,215, valuing it at 25x price-to-earnings multiple based on September 2027 estimated earnings. “Post-festive sustenance of demand and response to new launches & related cannibalization are to be watched out for,“ said the broking firm in a report.

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