Local Powertrain Manufacturing, Product Mix Change Drive 8.9 Percent Net Profit Growth at CNH India

Case New Holland Construction Equipment India reduced its direct material costs by 8.51 percent in 2025 through localizing production of its FPT F28 diesel engine at Pithampur and altering its product mix, among other measures. The savings shielded corporate margins against doubled ocean freight charges and a 7 percent drop in domestic equipment demand, enabling net income to expand 8.93 percent to ₹203.88 crore despite an 8.92 percent rise in revenue.

Regulatory disclosures filed by the company with the Ministry of Corporate Affairs (MCA), sourced through data intelligence platform Tracxn, show that CNH India’s Cost of Materials Consumed fell 8.51 percent in 2025 to Rs 1,629.82 crore, down from Rs  1,781.38 crore in 2024.

Under standard automotive and heavy equipment manufacturing economics, raw material costs scale in direct proportion to production volume and revenue. However, CNH India achieved this material cost reduction while its Revenue from Operations expanded 8.92 percent to Rs 2,495.99 crore, compared with Rs 2,291.64 crore in the preceding year.

Consequently, material costs as a proportion of operational revenue dropped from 77.73 percent in 2024 to 65.30 percent in 2025. This structural margin improvement provided the company with an operational buffer to absorb global shipping inflation and maintain bottom-line growth.

The FPT F28 Engine as a Cost Reduction Lever

One of the  primary driver behind this material cost reduction was the localization of the FPT F28 engine. In heavy construction equipment, the engine represents one of the single most expensive sub-assemblies, typically comprising 10 to 15 percent of a machine's total bill of materials.

The  imported fully built engines, the importer normally  incurs customs duties, international shipping fees, and port landing charges among others. Under a licensing agreement with sister entity FPT Industrial, CNH India localized the manufacturing of the F28 engine at its Pithampur industrial facility.

Shalabh Chaturvedi, managing director of CASE Construction Equipment India and SAARC, stated that localizing the engine eliminated import duties and international transit tariffs. "Engine is typically on a machine cost would be about 10 to 15 percent of a cost of a machine," Chaturvedi said. "So just localizing that will save off nearly 20 percent that gets impacted if you are importing, which includes the custom duty, the logistics, the landing factor. So nearly 20 percent efficiency on the 15 percent of the cost of the engine." Chaturvedi told Autocar Professional, on the sidelines of the recently held annual general meeting of industry lobby body, ICEMA in Delhi.

Integrating the localized F28 engine elevated the overall domestic content of CNH India's primary machine platforms. The engine powers the company's Tractor Loader Backhoes (TLBs), including the 770NX, 770NX Magnum, and 851NX models, as well as the 952NX double-drum asphalt vibratory compactor.

"The NX series loader backhoes, including the local engine, will have a localization in the range of 95 to 96 percent already," Chaturvedi noted. "On vibratory compactors, it will be close to 90 percent more or less. And on excavators, it will be in the range of 55 to 60 percent."

Chaturvedi added that a changing product mix also contributed to the overall reduction in material costs. Increased production and export of smaller machine formats, such as skid-steer loaders, pulled down average per-unit component expenditures.

The FPT F28 engine operates under an internal sister-company licensing arrangement with FPT Industrial.

Neutralizing Ocean Freight Inflation and Transit Delays

The cost savings generated at the factory gate proved vital in neutralizing severe inflationary pressures in global distribution. During 2025, geopolitical tensions and commercial shipping realignments severely disrupted ocean freight routes.

In addition to it, intense capacity bidding on trans-Pacific shipping lanes, driven by front-loaded shipments from China to the United States ahead of expected tariff deadlines and the Thanksgiving holiday season, diverted empty containers away from secondary industrial hubs like India.

As a result, ocean freight spot rates surged two to two-and-a-half times above historical baselines . MCA filings reveal that CNH India's on-balance-sheet freight expenses rose 9.21 percent to Rs 94.04 crore in 2025, up from Rs 86.10 crore in 2024.

Beyond direct transport rate increases, container shortages created physical shipping delays across the industry. Chaturvedi described this operational disruption as a two-to-three-month "calendarization" lag, where completed machines remained held at ports waiting for vessel allocations.

"Logistics cost is two to two and a half times the inflation that has happened in the logistics cost itself," Chaturvedi explained. "In terms of availability related disruption, I feel over a longer horizon, it does not really impact, but it will impact in terms of calendarization. So whatever we were expected to export in the month of June, we were able to export in the month of August. There is a two to three month lag that is getting created across the industry."

While the delivery delays deferred revenue realization, Chaturvedi emphasized, "More than revenue, it will impact the working capital because we have already produced the machines," Chaturvedi said. "The capital is blocked, and now we are not able to ship it out. It is creating more of a cash flow issue or a working capital issue."

FY25 Financial Performance and Domestic Market Contrast

Despite freight rate inflation and working capital friction, CNH India's gross margin expansion supported higher net earnings across its standalone operations. Total income for 2025 grew 8.89 percent to Rs 2,536.34 crore, compared with Rs 2,329.24 crore in 2024.

Profit Before Tax (PBT) increased 9.23 percent to Rs 275.01 crore, up from Rs 251.78 crore in the previous year. Profit After Tax (PAT) rose 8.93 percent to Rs 203.88 crore, compared with Rs 187.15 crore in 2024 . 

This financial performance occurred against a subdued domestic market backdrop. In 2025, overall Indian construction equipment industry domestic sales contracted by approximately 7 percent due to national election cycles and temporary slowdowns in infrastructure project execution.

In contrast, CNH India maintained flat domestic equipment volumes, selling 3,173 units in 2025 compared with 3,203 units in 2024. The company offset domestic market stagnation through export expansion. Overseas machine shipments grew 19.01 percent to 4,821 units in 2025, up from 4,051 units in 2024. Total foreign exchange earnings from exports reached Rs 1,476.30 crore.

To further protect earnings against domestic market cyclicality, CNH India expanded its non-machine services division, offering multi-year service contracts and equipment attachments for heavy machinery lines such as bulldozers, motor graders, and excavators.

Although service contracts currently represent less than 5 percent of total revenue, the division achieved multi-fold growth during the year.