Hyundai Motor India (NSE:HYUNDAI) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the Q1 FY 'twenty seven Earnings Conference Call of Hyundai Motor India Limited. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Joseph George from IIFL Capital. Thank you, and over to you, sir. Thank you, Robin. Good evening, everyone. We welcome you all to the Q1 FY 'twenty six earnings conference call of Hyundai Motor India Limited.

0:48 Today, we have with us Mr. Tarun Gur, Managing Director and Chief Executive Officer Mr. Wang Duhar, Chief Financial Officer Mr. Dong Heepak, Chief Operating Officer Mr. Gopalakrishnan, CS, Chief Manufacturing Officer Mr. Saravanan T, function head finance, and mister KS Hariharan, head of investor relations from Hyundai Motor India Limited. I would now like to inform you that the call is being recorded. I would like to, invite mister KS Hariharan, Head of Investor Relations from Hyundai Motor India Limited over to you, sir. Thank you, Joseph. Good evening, everyone, and welcome to the Q1 Financial Year twenty seven Earnings Conference Call. Before we begin, I want to remind you of the Safe Harbor. We may be making some forward looking statements that have to be understood in conjunction with the uncertainties and the risks that the company faces.

1:47 The conference call will begin with our MD remarks on the business highlights, financial performance and outlook, followed by a brief presentation by me on Q1 financial year twenty seven, after which we will be happy to receive your questions. Now I hand over to our MD. Over to you, sir. Thank you, Harry. Good evening, everyone. Before we discuss our quarterly results, let me begin by highlighting a landmark achievement in our journey. 2026 marks Hyundai's thirty years in India, celebrating three decades of trust, pride, and progress. From investing more than 40,000 crore rupees to surpassing 13,500,000 sales cumulatively and making India a key global manufacturing and export hub, we continue to drive progress with purpose.

2:40 This milestone is not just a celebration of our past achievements, but also a testament to the strong foundation we have built for continued growth and success in the years ahead. During this journey, Hyundai has helped shape India's automotive landscape through innovation, localization, and customer centricity. As we enter the next phase of our growth, we remain committed to advancing technology and delivering future ready mobility solutions for our customers. Moving on to our domestic business, fiscal twenty twenty seven began on a very strong note. The first two months of the quarter reflected healthy momentum with cumulative sales in April and May growing by 13% year on year, supported by favorable demand environment and our strategic product actions.

3:31 However, the fire incident at one of our supplier facilities temporarily impacted vehicle production in June, constraining our ability to fully meet market demand. As a result, domestic volume growth for the quarter was 5.4% year on year, lower than our initial expectations. However, at Hyundai, agility has always been part of our DNA. Throughout our thirty year journey in India, we have successfully navigated various challenges through swift decision making, strong execution, and close collaboration with our partners. The recovery from recent operational disruption was yet another example of resilience, enabling us to return our operations to normalcy within a very short period.

4:27 This is the operator. You are not audible at this moment, sir, if you are speaking at the moment. Okay. Extremely sorry about this network issue. I will quickly, I think, go through the presentation again. So, anyway, I mentioned about the thirty thirty years completing, 40,000 crore investment, 13,500,000 sales. Of course, domestic, fiscal twenty seven began on a very strong note. However, the fire at the... Our supplier facility, constrained our growth to 5.4% in the quarter. But if you remember, we had said that we will recover this production within this quarter too. However, I'm very happy to report that most of it has already been done within July itself. So I think this is... This shows a strong resilience of Hyundai Motor India.

5:17 So this is the other thing I talked about. Of course, there are some achievements like Hyundai Venue, highest ever quarterly volumes, CNG contribution at 18%, rural contribution at an all all time high of 26%. So we are very confident that we are going to have eight to 10% year on year volume growth for this year, which we had stated at the beginning of the year. In exports also, in addition to this disruption in production, Middle East were affected, but you you would have seen that we have increased our exports to the other markets, and we have a very healthy order backlog. So now that the production is in full swing, you will start reflecting... We will start reflecting it in export sales right from July itself. Venue is also receiving a great response. And also, Verna PE, Extra PE, and also the left hand drive of Extra, we have already started the dispatches.

6:09 So we are expecting very strong recovery in exports and again, we are confident of delivering our stated full year guidance of eight to 10% year on year in exports as well. On CAFE update, I think this is an issue which which is being talked about. So I'm pleased to inform you that as per our internal assessment, we will fully meet the compliance requirements and not incur any penalty at all under CAFE two for the period fiscal twenty three to fiscal twenty seven. And, of course, you know, fiscal twenty seven also is going great. So zero zero penalty on CAFE two. Also, we are fully aligned to the CAFE three draft notification. Of course, we are waiting for the final notification to come in. Of course, profit margins year on year were impacted due to lower export volumes, of course, costs associated with the Pune plant, etcetera, etcetera. But, of course, our efforts to balance the calibrated pricing actions with disciplined cost management, I think they have helped us to minimize the impact.

7:11 So we are, again, very confident that the... What we had informed you earlier of EBITDA margin between 11 to 14%, I think we are well on track to achieve that even in fiscal twenty seven. So also, I'm happy to report that Pune plant third shift, we are starting from October itself. The earlier plan was mid of twenty eight, but we are preponing by... It by two years because of the strong response received on the venue in the domestic as well as in the export market. Also, the mid SUV... ICE mid SUV is ready to be launched in the festive season. And, of course, lot of activities on the AI integration and whether it is in sales and marketing, the AI sales agent, the hygiene chatbot, dealer AI platforms, in service, v o and... VOC analytics, service automation, manufacturing and supply chain. We are also working towards multiple initiatives, including quality inspection, predictive maintenance.

8:07 So our vision is to evolve AI from a productive tool into an intelligence co worker that supports employees, augments decision making and accelerates innovation. And soon, you will see in our products as well that we are advancing in vehicle AI capabilities. So thank you very much for your continued support to us, and I will now hand it over to Hari for a detailed review of the fiscal financial performance for the quarter. Thank you very much. Thank you, sir. Let me begin with our sales performance during the quarter. We achieved total sales of 178,082 vehicles in Q1 fiscal year 'twenty seven compared to 180,399 vehicles in the corresponding quarter last year, decline of 1.3% on year on year.

8:52 The impact on volumes was mainly due to the production disruption caused by supplier fire incident and geopolitical headwinds. In the domestic market, we sold 1 lakh 39,374 vehicles compared to one lakh thirty two thousand two fifty nine vehicles in the same quarter last year, a growth of 5.4% on year on year basis. We exported 38,708 vehicles as compared to 48,140 vehicles same quarter previous year. Moving to the segment mix in domestic market. SUVs continue to be the core pillar in our portfolio with a healthy mix of 70% during the quarter and similar trend has been observed both in urban and rural markets. On fuel front, we also continue to see strong momentum in the CNG segment with steady growth, reaching highest ever contribution of 18.2% in a quarter in Q1 fiscal year twenty seven.

9:50 Let me now share the financial numbers. Our revenue from operations stood at rupees 1 lakh 63,346 million in Q1 financial year twenty seven as against rupees 1 lakh 64,129 million in the corresponding quarter previous year. Despite many headwinds, our calibrated pricing strategy and favorable exchange rate helped support our revenue, which remained largely flat year on year. EBITDA stood at Rs. 15,117 million as compared to Rs. 21,852 million in Q1 fiscal year twenty six. EBITDA margin stood at 9.3% as compared to 13.3% in q one fiscal year twenty six. EBIT stood at rupees 9,546 million for the quarter as against rupees 16,571 million in q one fiscal year twenty six.

10:41 EBIT margin stood at 5.8% in q one fiscal year twenty seven. PAT for the quarter was rupees 8,886 million as against rupees $1,300,692,000,000 in the corresponding quarter. PAT margin for Q1 fiscal year 'twenty seven stood at 5.4%. Our Q1 fiscal year 'twenty seven margins were impacted by a combination of factors. Key common headwinds for both year on year and sequential basis were number one, the production disruption which impacted the volumes, especially of certain high margin models. Number two, waste ratio conflict impacting our export volumes, And number three, the commodity cost pressures.

11:27 In addition to these, on year on year, margins were also impacted by capacity stabilization costs. These pressures were partly offset by favorable exchange rate and our calibrated pricing strategy. On a sequential basis, margins were impacted by increase in discount levels and lower government incentives due to seasonality. While discounts increased sequentially, this was in line with the typical seasonal trend for the quarter. Importantly, our discount levels remained below the industry average and our q one financial year twenty six discount levels, reflecting our disciplined pricing approach. The sequential headwinds were partially mitigated by our continuous cost optimization initiatives and also absence of certain one off expenses incurred in Q4 fiscal year twenty twenty six.

12:19 This concludes my presentation. Thank you all for your time and attention. Now we open the floor for Q and A. Thank you. Thank you very much. We will now begin the question and answer session. Our first question comes from the line of Kapil Singh with Nomura. Please go ahead. Yeah. Good evening, sir, and congratulations on a strong performance.

13:06 My first question is on the margins. We have seen very strong gross margins, actually an improvement at a time when there was severe cost pressure. So can you just talk us through how much cost pressure we faced during the quarter and how we were able to mitigate that? And is there further cost pressure that we are envisaging on account of commodities and any price hikes we have taken thereof? Kapil. Hari here. So the commodity impact on our margins during the quarter was roughly 100 basis points on a Q on Q basis. In fact, the impact was largely seen in precious metals and copper. We could somehow minimize the impact on margins during this quarter to some extent, mainly supported by three factors.

13:57 Number one, our calibrated pricing strategy. Number two, our cost reduction efforts. And also, if you remember last time we indicated that there was a one off in commodity in Q4 of last financial year. So that also helped us to some extent during this quarter. Right? And your second question was on the price hike. Right? So price increase is something, you know, normally we take a calibrated approach here. So far this calendar year, we have taken three price hikes, you know, cumulatively around 100 basis points we have taken. Going forward, we will continue to see the commodity trend, the market condition and other factors as well. I know looking at all these factors, we'll take a decision on the price increase.

14:43 Thank you, Kapil. And, Kapil, we stay committed to our EBITDA guidance of 11 to 14% for the fiscal year. I think this is very important. So all our decisions are based on that we as... We should... We have... This is what we have promised to the market. So so we will take accordingly. And we have to have that balance between the volume aspiration and the margin. But one thing which you would have noticed is that year on year, the discounts have also come down. Last year, same quarter, discount was 3.4%. This year is 2.8%. And when the new models come in, typically, for... In the first year, the discount levels are zero. So we believe that s two, which will see two... Minimum two new models should really help us in in even managing, you know, within this discount level and also help us to not really go for aggressive price hikes, you know, and and maintain our EBITDA margins within this range, 11 to 14%. Hope I've answered your question. Thank you.

15:38 Yes, sir. Actually most of the OEMs are calling out very severe cost pressure of let's say around 300 to 400 basis points. So in that context, we expect more cost pressure ahead or most of it is reflected in your financials? Just was trying to understand Year on year, we had about 200 basis point on the commodity. Like you said, quarter on quarter, 100, but year on year, 200. Now what happens in the future is anybody's guess. It's very, very difficult couple. But as of now, I mean, we are holding on, and we will see how the how the market goes. The demand looks good. We also have to understand that the base of last year will start coming up from October, you know. Till September, everything is looking much more better in industry growth because the base was very low, but the GST came in in September. So we are expecting that from October, industry growth will do it. And so I think we have to be conscious of that as well.

16:37 So let's see, like I said, we'll have a calibrated approach and do what is best in terms of volume and profit put together. Thank you. Sure, sir. And sir, second question was on demand side. What is the outlook for the industry and for Hyundai? Can we expect market share to pick up now? And in the second half, do you expect Hyundai growth to be higher than the industry? For sure, we like I said, we will we are maintaining our 8% to 10% guidance, which means that we have to grow minimum 8% to 10% in the second half also because we have grown by only 5.4% in quarter one. And frankly speaking, from s two, like I mentioned, the base effect will start coming in. What will work for Hyundai is two absolutely new models in a high growth segment, which I think which will which will be an edge for us over the others. The second thing which will help is the venue third shift, which will mean more venue wall...

17:37 Volumes come up. So I think these are the two things which are really helping Hyundai versus the competition, which will help us to get back on the on the much... Market share winning ways going forward. On the export front also, like I mentioned, the back order is very strong. And also all these extra left hand drive, extra PE, of course, The Middle East, and all the effort which we have put up... Put put in the Central and South American markets, you know, because of the problem in Middle East. I think now we'll have both The Middle East coming in as well as the strong CSA and venue is also adding up. So I think all these things should really help us in the coming quarters. Thank you. Thank you, sir, and best wishes. Thank you. Thank you, Kapil. Thank you. The next question is from the line of Vinay Singh with Morgan Stanley.

18:27 Please go ahead. Hi, team. Thanks for that. Just a clarification from the earlier question. So looking at all the cost pressures that you know of today is where you still feel comfortable with the margin guidance, right? That is the way to read it. Comfortable is not the word. Nobody can be comfortable in this kind of a scenario. But we... I think we are... We feel that we are in charge of what we are doing. We know that where we are. And what we are saying is that, you know, we will take actions as and when required to ensure that we are within the 11 to 14% EBITDA range. I think this is what we are saying, to be very clear, Vimal. So we we don't like prices going up. At the same time, you see what the uncertainty, you know, Even crude, you see. One day, it reaches 90, other day, it is 73. So in this scenario, it's very difficult to really judge what's going to happen in the future.

19:22 So... And frankly speaking, our internal assessment suggests that things things are not going to be so tough on the raw material side. I think things will start cooling off, if not immediately, but definitely in the coming months, they should cool off as well. And we will keep that in mind, you know, when we are taking a decision on on price and volume. But discounts, of course, we'll keep them in check like we have been able to do in the last couple of years. And secondly, on the new model launch, fair to assume that both the models will be available for six months or one is available for six months of this year? I think, like I said, the festive season is coming. So H2, both the models will be achieved will be available in H2.

20:09 Now full s two or how much... So I can't really inform you the exact time of launch. But one model definitely, since it's coming in the festive season, it will be for the... Almost the entire s two. And just lastly on electric vehicles, this will be your first sort of a major EV launch in India. How do you see profitability of that versus the market? Because what we are seeing in your assumption is that you are probably launching an electric vehicle, Still we are seeing margin trajectory moving up. So is it the global cost structure of Hyundai that is helping you position it? Or you plan to price it in a premium side? Any thoughts on what will be your EV cost structure versus our competitors? Do you have an edge over there? While I'll... Yeah. Yeah. I got your question. While I'll not like to comment exactly on the profitability or the cost structure, but couple of things which are very important is that, one, we are gunning for the PLI for this new model. I think this is something which which we have not been able to do so far. So this is a very big boost to our efforts in this. Number two, you know, we have been working very, very strongly on the localization.

21:18 In addition to the battery packs, we are looking at the other elements on power electronics, and making sure that... And, of course, as you know, for the PLI, we need a 50% domestic value addition as well. So I think that is something which is very important. Of course, HMC strength in the EVs is something which will which will help us. Also, we are looking... Like I mentioned in my opening remarks, you know, this EV will not only be an EV. I think we will we will use AI in a big way. We're also working on the overall value proposition to the customer. You would have read, Vinay, about our announcements on the on the on the MyHUNDAI app, which gives customer access to 30,000 charging points. So I think a lot of things we are doing, you know, which will make our EV proposition a very strong one. And also, this is the first mass market dedicated EV from Hyundai. So I think we are building a very strong proposition for the customer, and we are quite confident that this should really give us volumes. On the profit and all, I would not like to make a comment, but these are some of the things which will help us to position it better.

22:20 Thank you. Great, great. Thanks, team. Best wishes for the rest of the year. Thank you. Thank you. Our next question comes from the line of Chandramohli Muthaya with Goldman Sachs. Please go ahead. Hi, good evening and thanks for taking my questions. My first question is just around the current utilization rates at the Chennai and the Taliban facilities. And just later that, just want to understand how much additional capacity do you see getting unlocked with the third shift on the venue? Actually, how you starting? So just to explain to you that we have three plants, Two plants in Chennai, one in Pune. Okay.

23:12 The Pune question, if you remember, we had said that phase one, we will be one seventy thousand, which is a three shift operation. So currently, we are working on two shifts. Now we are going to three shifts, which means that potential capacity can be one seventy thousand. So we'll see how much of it we can use starting from October, of course. You know? So this will be next two of s two of next year... S two of this year. So this is where Pune stands. The... But the most important thing is plant one in Chennai, where this year, you know, because the venue got shifted, the capacity is only 72% utilization. I think with the two new models coming in, we will reach the capacity utilization of 88% in the plant one of Chennai, and this is a major game change for us in terms of optimizing the cost. So on two fronts, one is the Pune plant where, of course, the third shift will help, and second is the plant one of Chennai where, you know, the capacity utilization will go up from 72 to minimum about 88%, 90%, 91%, if not more.

24:13 I hope I've answered your question. Thank you. Got it. That's helpful. Second question is just on the export business. So I think over the past four to five months, there's been a lot of disruption on the shipping lines into The Middle East, which is also an important part of your export business. So I just want to understand the confidence that you're seeing on export volumes coming back. Just want to understand how the supply chain is looking, how the shipping channels are looking for you? And also just related to that, we've seen visibly a big improvement in export ASPs, I mean, it's up about 7% Y o Y, 5% to 6% up Q o Q. So I just want to understand what are the key models that are driving that ASP pickup. Just export volume pickup in the medium term, is that backed by visibility around shipping channels as well as the ASP drivers? What are the key models that drive that?

25:08 Yes. So let me give you some levers for exports and why are we confident. So first is the new venue. We... It has received a great reception. Already, 29 markets are in... You know, they they have started giving orders, and we are planning for 35 total markets in the near future. Then extra LSD, which we have launched for the first time, the shipment is starting in this quarter. And 13 markets, we will reach one three. 13 markets by quarter three. And Verna PE also from June, we have started, and more than 25 markets will reach by q three. So I think these are the three things. Yes. Those challenges on freight, state of hormones, etcetera, you know, are still continuing. At the same time, along with our partner, logistic partner, we are trying find... Finding ways.

25:55 And, you know, and we believe that... And they... Because the back order is very strong. So I think you will see in July itself, you know, the the shipments of export would have gone up. One, because of things opening up and from Middle East in terms of orders, and number two, because that incident is behind us and we have been able to do the production. In Mexico, although there was challenges because of tariff, but it's still holding on, and we are we are receiving some some good orders from Mexico as well. So I think CSA... The efforts done in CSA, Central And South America in court... In January to March quarter and April to June quarter will hold us in good stead going forward as well. You know, because it it it... The 23% year on year growth and the demand remains steady there. So I think we are... That is why we are confident.

26:43 On ASP, as more and more... You know, of course, ASP, although it improved, but please understand because we had to shift from Middle East to CSA, the Hatch contribution went up, you know, because CSA is more of Hatch dominated. But the moment Middle East opens, the Varna opens up and, you know, so that will again give us more opportunity. Also, East is mostly automatic, so that also increases the ASP. So I think that is what all those factors should really help us to increase export. And maybe Harry will add some more things. Yeah, Harry. Yes, Chandra. So our broader strategy is we are looking at enhancing our SUV mix in exports as well. So domestic, already, we are very strong with 70% SUV contribution. But if you see exports, we have hardly 13%, 14% of contribution. So clearly, can understand there is a lot of headroom here to improve the SUV mix. So that is a broader strategy. So we are working towards that. Thank you.

27:41 Got it. Thank you very much and all the best. Thank you. The next question is from the line of Gunjan Prathyani with Bank of America. Please go ahead. Yeah. Hi. Thanks for taking my question. My first question is just clarification on this Venue third phase. Eventually, entire Pune plant is going to be Venue plant, which means roughly 14,000, 15,000 sort of per month production. That caters to both domestic as well as exports. So this third line will essentially cater both domestic as well as exports. That's the way to think about it, right? Absolutely. You're spot on. Okay. And on the capacity utilization, which you mentioned, will go up from 72% to 88% in the Chennai plant. Is that something when both the launches are ramped up? Or is it that we are expecting 88% in second half? How should I think about this number that you gave on the Chennai capacity utilization?

28:42 Yes. So I talked about Plant 1, and what I mentioned was that in 2026, in Plant 1, broadly, are at about 72% capacity utilization. And we believe in 2027, we should be around 90, 92, maybe more in Plant one, you know, Plant one of Chennai. So so, I mean, so this is where it is. So 26 in 2026 calendar, 72%. In 2027 calendar, 90, 92%. Yeah. This is the best I can do to answer your question. I hope it helps you. Thank you. No. This is this is helpful. Okay. And second question, Varun, if you can give us a little bit more if you can, to whatever extent, give us a little bit more understanding on the position of the midsized SUV that is due for launch during Fresh Deep.

29:31 And the reason for this question is I mean often we end up comparing midsize Creta and other model in the same category. How should we think about the positioning of this model? And if you indeed with this launch worry about what happens to the Creta volume? So some thoughts around this. Look, if you see this segment, mid SUV segment is growing very sharply. And of course, Creta continues to be the market leader here. At the same time, we believe that two models clearly a space for two models and the positioning will be very different from the Creta. Like I mentioned, it will be kind of a technology first positioning. We are moving more and more into software defined vehicles, connected mobility platform. Of course, we are having more and more Gen z and digitally native customers.

30:19 So a lot of things. You have to be more patient because I don't want to divulge too much of a marketing strategy, but we have a very, very clear differentiation with Accreta. Don't worry about it. And like I mentioned, also, you see, there is a clear space, you know, between four meter and, say, 4.4 meter. You know? This this this segment is really, really opening up, and we have seen even the industry, you know, many more models coming in. So I think there is a very clear opening for us, and and that is why we have decided to get into this segment. Thank you. Got it. And just last quick one, if I can, on the venue. If I remember in last call, you mentioned you'll sort of come back with what is which are the markets that venue can cater globally because outside of India and Korea, Venue is roughly 100,000 or 90,000 odd market sizing. But is it that we cater to entire market size outside of India and Korea? Or is there any other way to think about in terms of the potential for target markets for venue?

31:25 No. It's not so easy because, you know, the regulations are very different in different markets. So if we want to really cater to some of those market, then we'll have to spend a lot in CapEx, etcetera, etcetera, and then it increases the cost for the overall venue. So we have to be very selective. At the same time, there are enough markets where, you know, like I mentioned, that we can we can do the venue. We are already looking at doubling the venue volumes at the minimum, and the response has been very good, in fact, from from all the markets. So I think this is a new opportunity which is kind of opening up, but definitely no. Answer to your question on the developed markets taking this new venue, I think the answer is a clear no because the regulations will be very, very expensive to for us to do as of now. But at the same time, we will continuously evaluate and see if there are more opportunities there.

32:14 Thank you. Got it. Thank you so much. Thank you. The next question is from the line of Amin Piranhi with JPMorgan. Please go ahead. Yes. Hi. Thanks for the opportunity. Most of the questions have been answered. But can you just give us a sense given the demand has been so strong and your production had been impacted, what is the kind of dealer inventory levels that you are witnessing right now? And how do you think about dealer inventory buildup as we go into the festive season and you prepare for the launch? Obviously, in June, the dealer inventory level came down because of the production disruption. We had a good growth in the retails, and we were able to meet the retail numbers.

33:01 But now we have to build... Now the production is back. Like I mentioned, most of the production loss has been recovered. So we will continue to build inventory over July, August, and September for the festive season. At the same time, we are very prudent in that. You know? So we will take a balanced approach and not really burden the dealers with inventory. The good thing is the retail momentum continues to be high, and you would have seen that our discount levels also at 2.8% are lower than the year on year discount level of 3.4%. So I think we are maintaining a very prudent approach, and we will see that we have adequate inventory or optimum inventory as we enter the festive season in October. Thank you. Okay. Thanks for that, sir. I'll come back in the queue. Thank you. The next question is from the line of Raghunandan N. L. With Nuvama Research.

33:52 My first question was on the demand side. Good to see that you are retaining the domestic growth expectation at 8% to 10%. For the industry, when it comes to urban versus rural demand, are you seeing signs of slowdown in rural? July Vahan registrations indicate that there is a slower growth in the rural markets versus that of urban markets. So trying to understand any initial signs of slowdown because of the El Nino impact or anything like that? Okay. So first thing is, of course, we are not seeing any slowdown in the rural markets.

34:42 If you see quarter one of 'twenty six quarter one of 'twenty six, rural contribution was 22.6%. Whereas this year, quarter one of twenty seven, rural contribution has increased to 25.9% for us. In terms of growth, rural growth was 23.2% in this quarter year on year. Urban growth was only 2.8%, and that is how the overall 5.4% growth came in. So I think we are seeing a good traction. That has also to do with our strategy on the rural. Like I mentioned, six out of 10 outlets which are being given are in the rural areas, and that we have been doing now for three years, the mobile service vans which we are deploying. The acceptance of our SUVs in the rural markets is something which is again helping us. So I think we are seeing a continuous traction.

35:29 L nine o and all, we have been hearing about it now for three, four years, but we have not seen that kind of an impact. And continuous... You know, because I think two two or three things which have happened is, one, the road infrastructure has improved dramatically in the rural areas. Number two, the the dissemination of information because of, of course, the geo and, you know, whatever whatever. So rural customers now know about the new products, and that is why their demand for SUVs has really gone up. In fact, our contribution in the rural areas is now equal to urban areas. So... And and number three, not only more outlets, but the big focus on service is another thing which which is giving the confidence to the rural areas or rural customers that, okay, they can buy a car because they will have somebody to look after it as well. So I think those things give us this confidence of rural markets, and it continues unabated as far as the rural traction is concerned.

36:24 So we don't see too much of a pressure there as far as rural growth is concerned. Hope I've answered your question. Thank you. Thank you, sir. That was comprehensive. Thanks for that. My second question is on the cost side. Good to see the maintenance or the efficiency in the gross margin. But on the employee cost and other expenses, there has been an increase, 20% growth in the employee cost and 10% growth in the other expenses. Any one offs or anything to call out in these cost items? And how should we see these items going forward?

37:12 Raghu, first of all, on the employee cost, year on year increase, whatever we are seeing is mainly to do with the Pune plant commencement. And of course, the yearly salary revisions also get reflected in the employee cost. If you see the other expenses other expenses, actually, year on year, the increase is mainly attributed to increase in freight cost, especially for the export operations. But the point to be understood here is as far as freight is concerned, we generally don't see any impact on the margins because whatever is the increase, we generally recover from the distributors. Hope it is it clarifies, Raghu. The next question is from the line of Ashish Jain with Macquarie India. Please go ahead.

38:11 Hi, sir. Good evening. Sir, my first question is the new model launches that we are seeing. Is there any export opportunity of these that we are evaluating at this moment? So if you see, Ashish, right from the time we set foot in India thirty years back, export has been a key pillar of our strength. And our our SP normally is that we launch a market... Launch a model in the domestic markets, and after three months, we launch it in the export markets. Also, if you see the emerging markets, you know, their their economy, their customer preferences are very similar to India. So these two models, we believe, would have a good traction, both the mid SUV, you know, as well as the EV with...

38:58 In the export market. But at this point of time, I cannot give you some numbers or the market. So at the right time, we will inform you about our plans for the export markets of these models as well. Yeah. Thank you. Sir, secondly, you spoke about the difference between rural and urban growth in this quarter. Is it also reflecting the disruption in Creta sales? Is that the main reason? Or you think this is the core demand momentum was so divergent between rural and urban this quarter? Like I mentioned, the SUV contribution in rural and urban is same, and Creta demand... Creta only happened in June because of the disruption. You know? The majority of that 13,900 we lost was Creta. So that happened only in June. But generally, we are seeing the same SUV contribution in urban and rural areas. So I don't think Creta has anything to do with it.

39:52 Thank you. Okay, okay. Thank you so much, and that's it. Thank you. The next question comes from the line of Pramod Kumar with UBS Securities. Please go ahead. Yeah. Thanks a lot for the opportunity. Param, just one clarification. Sir, on the industry growth, is that what is our forecast for the full year? Just double checking. Look, H2 like I said, H2 industry growth will be the real industry growth because that will come at a base which is real after So the let's see, it's anybody's guess. We are definitely looking at HMI growth of eight to 10%. My guess is industry growth should be in the lower single digits, you know, in s two.

40:37 So... Because the base is really high, and and we are seeing a lot of... Of course, as you know, industry is seeing a lot of headwinds in terms of raw material costs, etcetera, etcetera. So I think it should normalize to lower single digit in H2 fiscal twenty twenty seven. So full year consequently will be what, Again, percent, 8% growth for the industry? Because first half, it's so far, 17% growth or thereabout July so far. I wish I could really guess as good as you. But maybe 8%. Let's see. Maybe 8%, maybe 9%. Let's see. We don't know. Different different companies are giving different projections. Still, some people are sticking to five to 7%. Let's see. Let's see. It should be in the range of, I think, six to eight, 9% is what my guess is.

41:27 And okay, the industry growth can be a very different outcome, but something which you can have reasonable confidence on the market share side with the launches and what is the exit kind of exit market share what you're looking at because we've kind of paid a huge price on market share because of production issues and various other problems. Now with the launches also coming, capacity ramping up, what kind of exit market share would you aspire to have when you exit FY 2027 sir? Definitely. So if you see the last fiscal, we ended with something around 12.3, 12.35 market share. So we should do much better than that in terms of the exit market share because by the time we exit this year, we would have both these two models up and running. So I think we should be doing fine in terms of market share.

42:15 And like I mentioned, in s two, we will surely be outpacing the industry growth. This is... We are very confident about it. And two, three factors, like I already mentioned, two new models, then the... Then, of course, the free sales, which are... And, of course, the venue third shift. All these three factors are very, very specific to Hyundai, and which should help us to the industry growth in H2. Thank you. And second is on the PLI. So you said the new model you aspire to have PLI, which I think will make the product pretty competitive. But do you expect it to be the case with from day one? Or do you expect it will happen over a period of time as you kind of ramp up the localization? Or you're already starting the production REPRESENTATIVE:] with high localization and hence eligible for PLI from day one?

43:00 So as far as readiness is concerned, we are targeting day Administrative and all could take whatever time. But as far as we are concerned, we are getting day one readiness on the PLI for the new EV. And finally, that Keta anything? Because we can see the volumes what Sentosa is doing. Of course, Creta is holding its own. But the kind of bump up what Sentosa has seen in demand even without the hybrid coming. So just trying to understand what is the likely time line? Is it first half FY 'twenty eight, where one should expect the new Creta or it could happen earlier? You are always very hungry for information. So anyway, I think we have given enough information on the new launches. And don't worry, at the right time, we'll announce about the Creta FMCL as well. You know? Right now, let's enjoy the new made SUV, which is going to be launched in the festive season, and the new dedicated EV, which we are going to launch. I think they would be exciting enough.

43:58 Our next question is from the line of Yash Agrawal with Nirmalbang Institutional Equities. Please go ahead. Hi, sir. Thank you for the opportunity. Most of the questions have been answered. Just one question on rising CNG contribution. So basically, like CNG have a better margin profile than the ICE counterparts. And if the CNG contribution increases going forward, can we see a better product mix? I would not like to comment on margins. I think you can say similar margins is much better to understand this. And CNG helps us in multiple ways.

44:46 Of course, it is the cheapest way to meet CAFE. And, of course, it helps us to increase volumes. And we have a technology agnostic strategy, as you know. You know, we believe that in the lower segments, especially, say, in the less than 15, 25 segments in very potent weapon. We'll continue with that. And we already announced, if you remember, that by 2013, we will have five or six CNGs. We will have four or five hybrids. We will have four or five EVs. So we will have a very strong mix of all the technologies, all the green technologies rather sticking to one. So every year, you will see improvement happening towards more goal of 2030,232, so more than 50% through greenfield.

45:31 Thank you. And also my second question is on this elevated staff and other costs. So can we... Sorry to interrupt, Riyash, but you're not clearly audible. Request you to please check the mobile... Am I audible now? Your audio is fading out. Is it better now? Yes. Please go ahead. Yes. Basically, I'm just asking that the staff costs and other costs have been elevated in Q1. So can we expect them to moderate a bit or they will remain at same level, like same percentage of sales going forward? See, of course, on the overall cost front, you know, we have been continuously working for, you know, cost optimization efforts because employee cost is one. I already explained the reasons for the increase.

46:20 Even commodity pressure, we have discussed. So though these cost pressures are there on one side, we have been working on lot of other cost optimization efforts through improving our localization and value engineering activities in order to take care of the margins. The staff cost is primarily because of the Pune plant, like we mentioned. You know? So more more volume, so it comes at some cost. Yeah. Thank you. Okay. So that's it. So I want to take best of luck for next week. Thank you. Thank you. The next question is from the line of Jyoti Singh with Haitong Securities. Please go ahead. Yeah. Thank you for the opportunity. Just as a follow-up question on the export side, like we have mentioned good export overall.

47:06 So can we expect export volume to recover to the Q1 level, which was 48,000 somewhere? And within the next two quarters, what markets get you there? And another question on the AI side, like we have discussed very detail in the PPT. So what kind of vision we are seeing over there? And can you quantify the actual P and L impact so far on the cost savings side, whether headcount avoidance or conversion uplift? So that will be very helpful. Okay. First question first. So 48,000 in a quarter is what you want. I think your aspirations are much lower. Our aspirations are much higher. So we will be better than that 48,000 quarter in the coming quarters on the export front. I already gave you the reasons, so I will not repeat.

47:54 On the cost control and all, I think I'll request Harry to say. On AI, you know, so many things are already happening in sales, service operations, and I already mentioned about manufacturing, supply chain. Something which you have not witnessed so far so much is on the product side, which you will soon start witnessing with our future product launches. What I can assure you is that Hyundai Motor India will take a lead in terms of AI in the automotive space, and it will be a three sixty degree effect you will see, not only limited to one area. Harry, can you take the cost question? Yeah. Yeah. So as I mentioned, we have been, you know, closely working towards, you know, improving our localization. We have been working with the supply chain. In fact, our localization level, a couple of years ago, it used to be somewhere around 77, 78%.

48:42 But today, if you look at our number, it is quite healthy at 83%. So... And we have a midterm target of reaching 90% localization by 2030. Right? So quite clearly, can understand, you know, we have been very aggressive in terms of, you know, improving the localization. Similarly, as I mentioned, value engineering activities also, we have been continuously doing. We are working with the supply chain. Even at the plant level also, we encourage our employees to come out with cost reduction ideas. We we motivate the employees. So these are all, you know, some of the activities we have been continuously doing to to to keep the cost under check. Sure. And another any impact we are expecting in Q2 because of the June disruption? Or we are fully caught up on production end of July and August? Any expectation over there, sir?

49:34 Fully caught up. In fact, almost every most of the thing has already been done July. Whatever little is left will be done in August and September. So everything will be done within this quarter. Thank you. We have no further questions, ladies and gentlemen. I would now like to hand the conference over to Joseph George for closing remarks. Over to you, sir. Thank you, Darwin. On behalf of the management of Hyundai Motor India Limited, I thank you all for joining the call. You may now disconnect your lines. Thank you.