Hyundai Motor India Limited analyst Q&A

Thank you very much. We will now begin the question -and-answer session. We will take our first question from the line of Rishi Vora from Kotak Securities. Please go ahead.

Congratulations team for a great set of numbers. My first question is regarding the quarter itself. On a sequential basis, excluding other operating in come, our ASPs have gone up by almost 4.4%. So, can you just give us what were the driver s of this? It was just mix or something else was also contributing to such a sharp increase on a sequential basis?

Hi Rishi, thanks for the question. Yes, our ASP has improved on a sequential basis. In fact, there are different contributing factors here. If you loo k at the domestic especially, we have done the price increase in the month of January. Plus, we ha ve also moderated our discount levels in domestic on a sequential basis. Apart from that, we also had a favorable product m ix. Even on the export market, the product mix was quite positive this quarter. So, all these factors have actually supported us for the improvement in ASP. In fact, our ASP has improved b y more than 5% on a sequential basis. I hope I have answered your question, Rishi.

Yes, and a second question just on the industry side. The hatchback segment as well as the Sedan segment for us, as well as for the industry has been in a consistent downtrend. So, I just wanted to get a sense from the management on what will change this and when should we expect some recovery, some bounce back from these two segments?

Thank you for your question. This is a question we have been getting every year, but the segment continues to reduce. Please understand, it is not a bout only affordability. I think it is also about the clear change in the customer preference. So, what is happening is, if you see the micro-SUV segment, which did not exist 3 years back, suddenly that has become a very substantial part of the market. Almost 5.7% of the market was micro-SUV in 2024. In fact, it is 6.3% now. Many of these hatchback customers, in the same price range, are going to the micro-SUV segment. So, I think it is more about the body type than affordability. That is point number one. Point number two is, earlier the hatchback segment used to depend a lot on the first-time buyers. But now the first-time buyers are very clearly movi ng towards SUVs, which is very clear even in Hyundai's first-time buyer percentage, which con tinues to go up. In fact, it has now reached almost 40%. So, what I am trying to say is, it does not appear that there will be a bounce back in this segment. In fact, many of the players are leaving that segme nt. Also, you talked about Sedan segment. Many of the players have left the premium Sedan seg ment. So, it appears that SUV is the way forward. I think the only thing which can change is , probably EVs. Maybe some opportunities may come in the EVs, but it is too early to comment on that as well. But in the near term, I do not see the segment boun cing back. At the same time, it is still substantial, 23% hatch and even 9%- 10% Sedan, is still a good 30% of the market. So, I do not think we can ignore it. We still need to be present and I think Hyundai's strategy is very good that we are very strongly present there. And, of co urse, we have no intention of leaving these segments because they are really, really very good for us even going forward. I hope I have answered your question.

Yes. Thank you, Tarun.

Thank you. We will take our next question from the line of Binay Singh from Morgan Stanley. Please go ahead.

Hi, team. Thanks for the opportunity. I will just go back to the gross margin question. Could you quantify what was the Jan price hike? What was the discount thing? And also, we have seen in most of the companies that when EV share goes up, margins go down. So, was there a drag that electric vehicles rise had on margins? So, that is the first question.

Hi, Binay. Thanks for the question. So, the first o ne is on the price increase. The price increase was around 0.6%, which we did in January. And point number two is on the discount. Yes, as I mentioned earlier, discounts in the domestic especially, has reduced on a sequential basis. In Q3, the discount was 2.6% and in Q4, it has reduced to 2%. So, there is a reduction of 0.6% on the discount as well. And point number three is on the EV profitability. Today, if you look at Creta EV, if you exclude the launch-related marketing exp enses and the test drive discounts, we are margin positive on Creta EV. And going forward, if you look at even the penetration level currently, for the industry and for HMI as well, th e EV penetration is still at a very low level. So, whatever is the margin impact should not have any material impact on our total profitability. Having said that, we are working on an aggressive l ocalization strategy for the EVs especially. You already know that we have localized the battery pack assembly with Creta Electric. We are also working with a local partner to localize the b attery cells as well. So, there are a lot of opportunities for us to localize the components, es pecially on the EV side. When we do that, I think that should really support us to bring down t he cost and support for the margins going forward.

That is helpful. And the second question again on EVs, I noticed that you've increased the number of electric vehicle launches from 4 earlier to 6 now. So, what's the thought behind that? Are we seeing more opportunity in EV than we anticipated? What is driving that change?

So, just to clarify, 4 was the new models, but this six includes refreshments as well because we have said very clearly, this 26 model launches include refreshments as well. So, that is what we are talking about. More details, of course, we'll be sharing during the investor day.

Great. Thanks, team.

We'll take our next question from the line of Kapil Singh from Nomura. Please go ahead.

Good evening, Sir. Congratulations on a strong per formance. My first question is on market share. We can see that quality of sales strategy is working quite well and your margins have been better than peers this quarter. But at the same tim e, there is some pressure on market share also that we see. So, how are you thinking about the bal ance of these? Are we going market share and margins and will there be any new nameplates th is year which can drive up your market share from where you are in quarter 4? And then on the exports also, recently we have seen some pickup. So, any more detailed color if you can shar e what has happened that has caused the growth rates to pick up there?

Thank you for your question. Look, no company wants to lose market share. Even we don't want to lose market share. At the same time, I think bei ng listed brings in much more responsibility in terms of profitability and volume. You would have also seen the results today. You have seen the discount levels. So, obviously, we are passing through a phase where industry is under stress. SIAM has projected 1%-1.5% growth in this financial year and companies are having a strategy where price cuts and rampant discounts are there. We have already announced a very aggressive model plan and obviously it has been married to the Pune plant capacity expansion. So, I think what is important is how do we navigate this period. So, our challenge is that opportunity. Of course, we are one company which has both export leverage as well as domestic leverage. What we are doing is, one, put the accelerator up on the exports both in terms of trying to look new markets, also the existing models in the current markets and also instead of reducing price, what we are doing is, we are introducing higher features in the lower trims also. I think there is a question on ASP. One reason why we have been able to increase our ASP, especially the domestic ASP, is because we have bee n able to give, say sunroofs in the lower trims, automatics in the lower trims. I think this is a very smart strategy because it prevents the need for higher discounts, it prevents the need for any price cuts, it gives more opportunity to the customer. So, I think to answer your question, we will contin ue on this path until this new model cycle kicks in. Out of these 26 models in the next 5 year s, 8 of them will be in the immediate next 2 financial years, starting April’25. So, 8 of them w ill come. So, I think we are a few time away from this new model cycle kicking in and I think un til then we have to make sure that our core competence of brand, network, technology stays and then of course we do not lose too much of market share. I think, this is what we are doing, maintaining qua lity of sale and a balance between domestic and export as well as between volume, market share and profit. I hope I have answered your question.

Yes, sir. Thank you so much. The second question i s on the capex plan. We have talked about INR7,000 crores. Could you give us a breakdown of w hat area this is going and is this higher than the average level that we will see over the ne xt few years because earlier we have talked about something like INR32,000 crores over 10 years. Linked to this we have also talked about some costs. So, if you could give us some indicatio n like will this drag down your margins this year or the EBIT margins or should we expect that you have other cost levers to offset that?

Hi Kapil, Hariharan here. Number one on the capex I NR7,000 crores which we mentioned, the major portion would go for Pune expansion, roughly around 40% we expect, followed by 25% for product-related investments. See again, this is the guidance which we are giving for the financial year’26. We will be sharing more details about the long-term capex plan in due course of time. Regarding whatever we have discussed on th e MOU, these are all some of the MOU commitments we have given to the State Governments like the Tamil Nadu and Maharashtra also. But as I mentioned, specific guidance on the long-term capex plan we will be sharing in some time. Hope I answered the question, Kapil.

Sure, and sir the cost part also if you can give s ome direction?

As we mentioned, we will be starting this Pune capa city from Q3 financial year’26. You can understand, with a plant of such scale, initially t he utilization level will be little low only and especially considering the overall weakness in the demand sentiment in the domestic market. So, that may have some impact on the margins. But what we are planning to do is that, as we have indicated, we are planning with aggressive product launches in the next five years. With that strategy, we are very much confident. Apart from that, even the export also we are going to foc us on improving our volumes strongly going forward. So, these strategies, we believe, should g ive us a lot of support to maintain and secure the margins even going forward.

Thank you. We will take our next question from the line of Gunjan Prithyani from Bank of America. Please go ahead.

Yeah. Thank you team for taking my questions. Firs t one is quick clarification. You mentioned eight of them in next two years. So, eight models in fiscal’26 and 27. Is that understanding right?

Yes. Fiscal’26 and 27 put together, eight models.

And any breakup on ICE and EV in that?

Overall, we have given, out of those 26 models by f iscal’30, 20 will be ICE and 6 will be EVs. But please wait for the investor day for more clarity on the immediate plans.

Okay. And the other clarification was on that you did speak about the operating income being higher. Can you quantify what was the government in centive in this and how should we be thinking about it on a full year? There does tend t o be a little bit of bunching up in second half, right? So, if you can just give some color how much was it in quarter four and how should we directionally think on the incentive for fiscal’26?

Hi Gunjan. If you look at our current Tamil Nadu MOU incentive, we have three different types of incentives. The first one is the tax incentive. The tax incentive is something which we have been getting for a long time. And that incentive basically starts coming from the third quarter or sometimes in the second quarter also. Second is the clean energy vehicle subsidy. The amount is INR25 crore, which generally comes in fourth quarter. And this year, we also have a new subsidy called a s capital subsidy. Since we achieved the MOU conditions, both on the investment side and manpowe r in last financial year, this particular incentive has accrued for us from financial year’25 onwards. The amount is INR75 crores. This is the bifurcation. So, if you see sequential ly, Q3 versus Q4, the additional incentive from the Tamil Nadu MOU is around INR100 crores. So, going forward obviously in the next year, every year, as I mentioned, the tax incentive will follow a separate timeline. But the CEV subsidy and the capital subsidy mostly accrue in the last quarter.

Okay, got it. That's very clear. The second questi on I had is more from the point that you made, using India as an important export market, right? I s there any rethink on what are the markets that we can still add in terms of exporting out of India? I mean Middle East and Africa you've touched upon earlier. But given the overall changes , noise around tariff, is there a rethink that we could have more markets which could get added wh ich India services from an export perspective? And I'm not thinking next 12-18 months , little bit next 3-5 years, how should we think about the potential of export? Because 7% - 8 % is great but I do think there are more markets which can get added. So, some thoughts around that.

Yes, thank you for the question. This is Unsoo. We are positioning Hyundai Motor India as an export hub for emerging market, especially Middle E ast and Africa, South Asia and Latin America. Currently, we have access to 80+ export ma rkets, where we have distributors.. And then we are very optimistic for the export market - current market and also we are exploring some advanced countries like Australia and other regions. And then, in terms of tariff conflict, it will not affect us. It is between the US and other countries. So, regardless of the tariff, we will improve our e xport volume. With expansion of Pune plant, we will reach 1.1 million units capacity. Last year , our export portion was 21% which we will increase to 30%. Our current model is very suitable for emerging market. So, we are very confident about the export market. Thank you.

So, basically, you mentioned about some new opportu nities. So, within Middle East also, like for example, in financial year 2025, we started Venue in Indonesia, we started Venue in Yemen, we restarted Bhutan, we started Exter in South Afri ca, Creta EV we started in Nepal. We are exploring other RHD markets. Alcazar facelift to Middle East and Africa. So, you know, while primarily it is emerging marke ts, at the same time, different models in emerging markets, I think, itself gives us a lot of opportunities to grow our export volume. So, I think this is important. And on tariffs and all of course, we will continue to study, because going forward with India-UK trade agreement etcetera, ma ybe some new opportunities will come, especially with the EVs coming in from the HMI plants. So, I think we are very open and we'll be discussi ng that what are the opportunities which can come to further increase the exports. And that is w hy we are saying, by 2030 the export penetration can go up and maybe reach 30%.

We'll take our next question from the line of Amyn Pirani from JP Morgan. Please go ahead.

So, my first question is on your comment, that you expect to grow broadly in line with domestic industry in this year. Given that the new plant is coming up in the second half and, we probably will have some refresh or product launch, is it a bit of conservative guidance or are you expecting some headwinds? Because ideally, we would have expected that you could actually outperform the market this year, after a bit of underperformance last year.

So, look, the year is divided into H1 and H2. Obvi ously, the new plant will come in the H2 of the financial year. I think this you have to keep in mind. I hope this also answers the question.

Okay. Understood. And secondly, just this clarific ation on the previous point, did I hear correctly that, by the time the full ramp up happens to 1.1 m illion, you are expecting exports to become close to 30% of volumes?

By 2030. Okay. But that would involve even more ex pansion, I'm assuming, beyond FY '30 ?

Okay. 1.1 million will happen But I think the inte nt is to really continue to increase export as a percentage of total sales.

Understood. Okay. Thank you. I'll come back in the queue. Thank you.

We'll take our next question from the line of Arvind Sharma from Citi. Please go ahead.

Hi, good evening, sir. Thank you for taking my que stion. On the Pune plant, when the commercialization starts, would there be a change i n the vendor base? I'm talking both on the perspectives of localization as well as group company? That will be the first question.

This is Gopalakrishnan here. We are trying to deve lop a whole lot of vendor ecosystem in Pune also. And the whole plant will be, in terms of auto mation and manufacturing practices, similar to the world-class manufacturing as per HMC global standards. And all the preparation works are going on.

So, sir, the supply from group companies would rem ain at the current level?

We'll be leveraging their capability, both the Che nnai plant as well as the Pune plant.

Thanks, sir. Second question would be just for acc ounting purpose. Was there any PLI benefit that you accrued in the fourth quarter, which is there in the reported top line?

Creta EV is the product we have launched recently. But since there are some minimum domestic value addition conditions to be met, which currently, there is some gap. But we are continuously evaluating the localizatio n opportunities in EV segment, as we have already indicated, one is the battery pack we have already done and there are other plans on the component side for EVs to localize going forward. So, going forward, I think, the strategy is to avail the PLI incentive. But yes, currently, we are not eligible.

All right. Thanks, sir. That's all from my side. T hanks so much.

Thank you. We'll take our next question from the li ne of Nitish Mangal from Jefferies. Please go ahead.

Hi, good evening, and thanks for taking my questio n. On the Pune plant, can you share which all models are you planning to manufacture there, a nd how many of your existing models will also be made there versus just the new models?

Thank you for your question. This is Unsoo. We will produce the SUV model. I cannot specify the model names, but we will announce those shortly . And then, in the coming years, we will add another SUV model in the Pune plant. I hope I answered your question.

Okay, sure. Thanks. And secondly, I want to ask yo u about the operating cash flow. So, the EBITDA for the full year was almost flat YoY, but t he operating cash flow, there is quite a bit of decline, and it seems there are some changes in other liabilities. Can you elaborate what happened on the other current liabilities?

So, if you see the cash flow, operating cash flow, mainly this year beginning, we had paid TDS on special dividend which we paid to HMC in last fi nancial year. The TDS was remitted in the current financial year, that is financial year’25. Plus also, there has been some increase in the MOU incentive receivables from the Tamil Nadu gover nment. So, these are all some of the major factors which have actually impacted the operating cash flow.

Okay, thanks very much. And if I can ask just one last question, how long are these Tamil Nadu incentives valid for you? Thank you.

The Tamil Nadu incentive, the tax incentive under current MoU, is valid till 2032. And the other subsidies, the CEV subsidy and the capital subsidy, they are valid for 20 years from the commencement date. One point I would like to add is that, all these subsidies are subject to fulfilling the MOU conditions, every year we need to achieve some conditions. So, the incentive eligibility is subject to that.

Okay, thank you very much.

Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. Rishi Vora for closing comments. Over to you.

Yes, thank you everyone. And we'd like to thank the management for giving us an opportunity to host the call. With this, we conclude today's co nference call. On behalf of Hyundai Motor India Limited, we thank you for joining the call an d you may now disconnect from your lines. Thank you.

Thank you, ladies and gentlemen. You may now disconnect your lines. Thank you.

Edited for brevity and inadvertent errors.