Maruti's Record Quarter: Volumes Up 26.5%, Material Cost Up to 79.9% of Sales

Maruti Suzuki sold its highest-ever number of vehicles in July–September 2026, 696,654 units, and its operating EBITDA still fell, from ₹5,084.8 crore to ₹4,763.3 crore. Its own investor presentation shows where the margin went: material cost rose to 79.9% of net sales from 75.7%. The company lists three negatives, including West Asia-linked commodity prices, and three positives. It does not say how big any of them is. This piece sets out what the filings carry, what they do not, and one piece of arithmetic that is ours.

MoatSCORE (provisional, first-pass) 5.11 on our Moat Screener. Our first-pass note on the company is on its moat page.

The idea in one sentence

A company can win more customers and still earn less on each, if what it pays to make a vehicle rises faster than what it is paid for one, and the filings let you see the first part clearly and the second only in outline.

The fact that breaks the assumption

Net sales were ₹50,615.5 crore against ₹40,135.8 crore a year earlier, up 26.1% ([DK], slide 5). Volumes were up 26.5%, to 696,654 units from 550,874. The company calls both its highest ever ([PR]). It also says its domestic market share rose 2.2 percentage points to 40.8% ([PR]; the release places this in its sentence on the domestic passenger vehicle market).

Against that, operating EBITDA fell 6.3%, operating EBIT fell 17.1% and profit after tax fell 26.9%, to ₹2,414.9 crore from ₹3,302.8 crore ([DK], slide 5). More vehicles sold, a larger share, and less profit, on every line below sales.

One caution on the comparison. Last year's figures are restated because Suzuki Motor Gujarat, a wholly owned subsidiary, was merged into Maruti from an appointed date of 1 April 2025 ([DK], slide 3; [RS], note 5). Both years in this piece include it.

One concrete thing, followed: slide 6

Slide 6 of the deck gives each cost line as a percentage of net sales ([DK]):

Read down the table: employee cost and other expenses both fell as a share of sales, which fits the company's "favourable operating leverage" (our reading). Material cost went the other way by more than all of them put together. The company's EBITDA margin gap of 330 bps is, line by line, material cost (420 bps, adverse) less employee cost and other expenses (100 bps, favourable), plus a 10 bps smaller other operating income.

To size the line: 420 bps of this quarter's net sales is about ₹2,126 crore (our arithmetic). That is an illustration of scale only. It is not a company figure and not a statement of cause.

The mechanism: cost per vehicle against revenue per vehicle

Ratios hide what happened per vehicle, so we rebuilt it. The deck's material cost can be reproduced from the results: cost of materials consumed, plus purchases of stock-in-trade, plus changes in inventories, less vehicles and dies for own use ([RS], standalone results, page 2). That gives ₹40,428.6 crore this quarter and ₹30,394.5 crore a year ago, or 79.87% and 75.73% of net sales, which match the deck's 79.9% and 75.7% (our arithmetic).

Divide by units sold (our arithmetic, and a rough index: units are vehicles, while net sales also include spare parts and other products, and the mix of vehicles changed):

On this arithmetic, material cost per vehicle rose by about ₹28,600 while net sales per vehicle were roughly flat. Net sales grew 26.1% and units grew 26.5%, which is why the average did not rise. In our reading, a flat revenue per vehicle with a rising material cost per vehicle is what produces the ratio on slide 6. More volume spreads fixed costs, which fits employee cost and other expenses falling as a share of sales, and the company's "favourable operating leverage"; it does not shrink material cost, which is incurred on every vehicle.

That is our reading of the numbers, not a finding of the filings, and the next section shows why it is incomplete.

What the filings say about cause, and what they leave out

The company gives its reasons twice, in slightly different words.

The press release says operating profit (EBIT) "stood at INR 28,037 million" (₹2,803.7 crore) against ₹3,382.0 crore a year earlier "owing to West-Asia conflict linked commodity increases". It adds that non-operating income "declined sharply" "owing to mark-to-market losses on invested surplus" ([PR]).

The deck, slide 7, is fuller. Under "Negative Factors": "Adverse commodity prices in the context of West Asia conflict"; "Adverse foreign exchange movement"; and "Lower non-operating income due to mark-to-market losses on invested surplus". Under "Positive Factors": "Improved realization"; "Favourable operating leverage"; "Cost reduction efforts" ([DK]).

Three things follow, all from the documents themselves.

1. One of the three negatives is not about making cars. The deck lists commodity prices and foreign exchange among the key reasons for margin movement, without saying which cost lines the foreign-exchange movement touched. The third, mark-to-market losses on invested surplus, is by its own name a non-operating item. Of the ₹1,125.1 crore fall in profit before tax, ₹578.3 crore is the fall in operating EBIT and the remaining ₹546.8 crore is the change in non-operating income net of interest (our arithmetic). The statement's "other income" line was ₹429.8 crore against ₹966.1 crore a year ago, and ₹1,873.7 crore in Q1 ([RS], page 2). About half of the profit fall is therefore not about cars at all. The half-year cash flow still shows a ₹1,868.6 crore fair-valuation gain on debt mutual funds ([RS], page 4), so the Q2 loss is a swing inside a half-year that remains a net gain on that line (our reading; the Q2 loss amount is not given).
2. The list is not a ranking and carries no amounts. The order of items on a slide is not a measure of size. Nowhere do the filings say how many of the 420 bps came from commodities and how many from foreign exchange.
3. "Improved realization" is a positive in the company's list, yet net sales per unit were about flat in our arithmetic. Realization is not defined, and the deck gives no price or discount figures. The two statements may be consistent, for example if mix moved, but the filings do not let us reconcile them. We flag it rather than resolve it.

Sequentially the deck tells a milder story. Material cost was 80.5% of net sales in Q1 FY27, so Q2's 79.9% is 60 bps lower; operating EBITDA rose 10.5% to ₹4,763.3 crore from ₹4,311.1 crore; and the company says operating EBIT grew 10.8% over Q1 ([DK], slides 9–10; [PR]). For the half-year, material cost was 80.2% against 75.1% and operating EBITDA fell 5.5% ([DK], slides 13–14). The quarter is not an outlier within the half. Q1 carried the higher ratio.

What the company says about demand

The company's own words on demand: "demand continued to outpace supply", with network inventory of about 17 days and pending bookings of about 200,000 units at the end of the quarter ([PR]). Domestic sales were 588,535 units, up 33.6%. Exports were 108,119 units, down 2.1% from 110,487 ([DK], slide 15); the release mentions "the challenging geopolitical situation" in that context ([PR]). Utility vehicles grew 52.3% and passenger cars (mini, compact and mid-size) 31.9% ([DK], slide 15).

The filings give no discount figure. Whether a supply-constrained leader could have passed on more of the cost is the question this quarter raises and the filings do not answer. Our earlier auto sales scoreboard covered the volume side of the same quarter from the monthly sales filings.

Where this breaks

• One quarter is one quarter. Our per-vehicle figures compare one quarter with one restated quarter. Whether cost per unit rising against flat revenue per unit is a pattern or a quarter cannot be tested on this sample.
• Per-vehicle averages are crude. Net sales include parts; volumes include sales to other manufacturers (down 23.2% in the quarter, [DK] slide 15) and exports; utility vehicles grew faster than passenger cars. A shift in mix changes both averages without any price change. Our "flat price" reading may be mostly mix.
• The cause list is the company's, not an audit finding. The auditors' limited review report is unmodified. It draws attention to two notes (the end-of-life vehicle rules and the Suzuki Motor Gujarat amalgamation) and says its conclusion is "not modified" on both ([RS], pages 10–11). It does not examine why margins moved.
• No peer comparison. If commodity prices and the rupee hit every carmaker equally, a cost advantage would show up as a smaller margin fall than rivals', not as no fall. This piece has no rival margins, so it cannot say whether Maruti's cost advantage held or slipped.
• The strongest case against our thesis: the company's list names commodity prices and foreign exchange among its negatives, and operating leverage and cost reduction among its positives, without sizes. If the pressure was external, the sequential ratio is already 60 bps better than Q1, and "price per vehicle" is the wrong lens. Read that way, the quarter says nothing about the moat.
• Unquantified items. The company says it "is currently unable to reliably estimate a range of possible outcomes" for its extended producer responsibility (EPR) obligations under the End-of-Life Vehicles Rules ([RS], note 4). That cost, whatever its size, is not in these results.

Why it costs the reader something

Volume and share are the evidence of scale. Margin is the evidence of what scale earns after input costs. A reader who takes "record sales" as "record economics" will have missed that profit before tax fell by ₹1,125.1 crore (our arithmetic). A reader who takes the fall as proof that the cost advantage has gone will be overreading a single quarter in which the company's own list blames external factors and half the profit fall sits in invested surplus, not in making cars.

Our first-pass MoatSCORE for the company is 5.11 on the Moat Screener, with Cost Advantage and Efficient Scale its two highest dimensions at 6 each on the moat page. That score is provisional and was set before this quarter's filings; it is a first-pass read, not a conclusion about this result. What a cost advantage needs to prove is that it holds relative to rivals when input costs rise. These filings cannot show that.

What to watch

1. Whether the material cost ratio in the December quarter moves from 79.9%, and whether the company gives amounts for commodity, foreign exchange and realization.
2. Peer margins for the same quarter, to separate an industry cost shock from a company one.
3. The non-operating income line: Q1 was ₹1,873.7 crore and Q2 ₹429.8 crore.
4. The EPR framework. The board also approved incorporating a not-for-profit Section 8 subsidiary, the Osamu Suzuki Centre of Excellence Foundation, with initial share capital of ₹1,00,000 and the Registrar of Companies' approval still required ([OS]). It is proposed, not yet incorporated.

The concrete thing, again

Slide 6 shows one line that moved in the wrong direction by 420 bps while demand, by the company's account, outran supply. The company names its suspects. It does not say how much each cost. Until it does, or until rivals report, the filings support the first half of our one sentence and only outline the second.

Sources

• [DK] Maruti Suzuki, Q2 and H1 FY27 investor presentation (NSE)
• [PR] Maruti Suzuki, press release, Q2 and H1 FY27 (NSE)
• [RS] Maruti Suzuki, Q2 FY27 results, notes and limited review reports (NSE)
• [OS] Maruti Suzuki, Regulation 30 disclosure, Osamu Suzuki Centre of Excellence Foundation (NSE)
• [SB] Auto Sales Q2 FY27: 11 Automakers Ranked From Filings
• [MP] Maruti Suzuki India Moat Analysis and [MS] Moat Screener, with How MoatSCORE works

Educational research, not investment advice. Every figure above is drawn from Maruti Suzuki India's own filings, read from the primary documents on 28 October 2026; derived figures are our arithmetic, labelled as such. MoatSCORE read live from the Moat Screener on 28 October 2026 and provisional. No buy/sell recommendations, no price targets, no share prices. Moat & Margin is not a SEBI-registered Research Analyst or Investment Adviser.