Automotive Axles FY26 Stronger Margins New Products

Ashwin Thakker

16 Aug 2025 — 2 min read

FY26 Sales Outlook: Overall market projected flat to slightly lower (around 4% dip in production), targeting INR400 crores ±3-4% in H2. Q2 expected to be significantly lower, with recovery anticipated in Q3 and Q4.
FY26 Margin Outlook: Expected marginal EBITDA margin improvement from new business model, product mix shift, and automation. Clearer visibility on impact anticipated by Q3 FY26. Exports to group entities may yield higher margins.
Product Development: 13.5m and 15m bus axle production to commence soon. Coach product trials to complete by Q2/Q3 FY26. Heavy-duty (50-55 ton) axles are in production.
Strategic Investment: INR120 crores capex approved for capacity enhancement, automation, and equipment. Phase 1 completion by FY26 end, Phase 1a by December 2026.

Automotive Axles Limited (AAL) Q1 FY26 earnings call revealed a strategic path forward despite a soft market. The company anticipates a flat to slightly lower FY26 but projects marginal margin improvements driven by a new business model, product innovation, and automation. Investments are aimed at future capacity and efficiency.

Market Dynamics and Margin Outlook

Automotive Axles Limited (AAL) expects marginal EBITDA margin improvements for FY26. This gain is fueled by a new direct sales model to OEMs and a favorable product mix, with full impact clarity anticipated by Q3 FY26. Q2 sales are projected lower due to OEM inventory and early monsoon. However, AAL forecasts market recovery in Q3 and Q4, stabilizing volumes around INR400 crores (+/- 3-4% of last year). Overall FY26 production is forecasted to be about 4% lower than the previous fiscal year. Exports to group entities are also expected to yield higher margins, improving overall profitability.

Strategic Investments and Product Innovation

AAL is investing INR120 crores in capital expenditure to strengthen its long-term capabilities. These funds are allocated to capacity enhancement, equipment modernization, and significant manufacturing automation, embracing Industry 4.0. Phase 1 of these investments is set for completion by FY26 end, with benefits expected by Q1 FY27. On the product front, the company is advancing new 13.5-meter and 15-meter bus axles; proto batches are supplied, and production is starting soon. Trials for other coach models will conclude by Q2/early Q3 FY26. Additionally, heavy-duty axles for the 50-55 ton range are already in production, enhancing AAL's market position and product offerings.

Conclusion

Automotive Axles Limited is strategically positioning itself for future growth and profitability. Despite short-term market softness, the company's new business model, product diversification, and significant investments in automation and capacity are set to drive improved margins and a stronger market presence. The coming quarters will provide greater clarity on these positive impacts, signaling a resilient and forward-looking trajectory for AAL.

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