Hero MotoCorp Flags Near-Term Margin Pressure amid Higher Input Cost

India’s leading two-wheeler maker Hero MotoCorp has flagged near-term pressure on its margins as rising commodity, fuel and labour costs push up manufacturing expenses. The automaker’s management said volatility in raw material prices has made the business environment difficult to predict.

According to the company’s Chief Executive Officer Harshavardhan Chitale, commodity headwinds started emerging in March and are expected to weigh on profitability in the short term, even as demand momentum in the domestic two-wheeler market remains stable.

“As FY27 begins, the broader economy is navigating certain short-term uncertainties due to the developments in West Asia. That has impacted the entire industry in terms of commodity costs, the cost of metals, the cost of gas, or in the recent past, we have also seen an increase in certain labour costs,” he said while speaking to investors on Wednesday, post announcing the company’s FY26 earnings.

“While operating momentum remained strong, the industry is currently facing commodity headwinds that began in March. We expect a transitional impact on margins in the short term.”

Hero MotoCorp identified aluminium, steel, rubber and plastics as the key commodities where there is cost inflation, with plastics also getting impacted by elevated crude oil prices. The company said material cost inflation during the January-March quarter stood at around Rs 2,100 per vehicle.

The company has taken calibrated price hikes across products to partly offset the increase in costs. Chitale said the average increase was close to 2% of the sale price, though he acknowledged that the hikes did not fully offset the rise in input costs.

“The price hike, as of now, does not cover the BOM cost increase fully,” the management said, adding that commodity, labour and fuel cost increases were running in the “high single digits” at the bill-of-materials level.

The company noted that it took cost-saving measures, tighter control over discretionary spending and value-engineering programmes aimed at reducing material costs.

“As management, we are doing whatever it takes to really mitigate the impact of that, which includes taking calibrated price increases and also accelerating our BOM-saving programmes,” the company said.

The automaker added that it is also postponing some discretionary spending while continuing to monitor commodity trends closely. “The way things are evolving, it's difficult to really commit at this point in time that how the full year is going to be,” the management said.

The company, however, reiterated its medium-term EBITDA margin guidance of 14-16%, despite the near-term pressure. Hero MotoCorp reported an EBITDA margin of 14.7% for FY26, up 30 basis points from the previous year, supported by a favourable product mix and cost efficiencies.

Management also said investments in electric vehicles are weighing on profitability in the near term as the company expands capacity and introduces new products. However, it added that losses per EV unit are reducing sequentially and profitability is expected to improve with scale benefits, cost reductions and production-linked incentive support. ENDS