JTEKT India Sales Rise 9%, But Margin Declines Persist

JTEKT India achieved a 9% year-on-year increase in passenger vehicle (PV) segment sales for FY 2025-26, selling 5.54 million units compared to 5.07 million in the prior fiscal. The company also reported a significant jump in export sales, which grew to INR 664 million from INR 551 million.

While overall EBITDA margins held steady at 7.5% for the full fiscal year, JTEKT India's financial performance showed notable fluctuations between halves. The second half of FY26 saw EBITDA margins improve to 8.48%, up from 7.71% in the comparable period last year, but the first half experienced a drop to 6.3% from 7.6% a year earlier.

The robust volume growth in PV sales and increased exports indicate sustained demand for JTEKT India's products from major clients like Mahindra & Mahindra and Tata, whose business with the company grew by 17%. However, a persistent decline in gross margins over the past two years, from 29% to 27%, presents a significant challenge.

This decrease in gross margins is attributed to several factors, including changes in the product mix, costs associated with developing new products, and foreign exchange rate fluctuations. The company has also experienced headwinds related to specific clients, such as a 30% reduction in business from Honda within the PV segment.

Looking ahead, JTEKT India's management is focused on optimizing existing production capacity, aiming for 100% utilization within 1.5 years. The company plans to leverage new product opportunities, including the upcoming Maruti Suzuki MPV EV, to drive future revenue and improve profitability. An expansion at the Toyota Bidadi plant is slated to begin in early 2029.

Key risks for JTEKT India include the ongoing trend of declining gross margins, potential further losses in client-specific business, and volatility in export markets. Although U.S. tariffs on certain goods were reduced to 10% following a Supreme Court order, past penalties and reciprocal tariffs had previously cost the company INR 63 million.

Investors will closely watch the company's progress on capacity utilization, the impact of new product introductions, and any further shifts in gross margin trends and client relationships.