Indian automobile manufacturers delivered a broadly resilient performance in the first quarter despite a challenging cost environment, with most two-wheeler makers limiting margin pressure through pricing actions and cost controls, according to a report released on Wednesday.

HSBC Global Investment Research analysed the sector and found that most two-wheeler original equipment manufacturers (OEMs) reported only minimal margin contraction during the quarter.

Effective cost management helped manufacturers absorb rising input expenses.

Commercial vehicle manufacturers also delivered a reasonable quarter, with performance trends falling between those of two-wheeler and passenger vehicle makers, the report said.

Commodity costs remained a key pressure point for the sector. Although prices softened modestly during the current quarter, input costs remained broadly stable and continued to weigh on profitability.

To offset these cost pressures, most automakers raised vehicle prices in July and August.

The price increases should provide some support to margins, although the impact will depend on demand sensitivity and the pace at which commodity costs ease, according to the report.

Analysts at the global brokerage said demand remained healthy across vehicle segments despite successive price increases. They expect mid-single-digit growth in the second half, improving on their earlier forecast of low-single-digit growth for most OEMs.

HSBC also noted that concerns over the monsoon have eased somewhat.

However, the report cautioned that further price increases and a high comparative base could challenge growth in the second half of FY27 and into FY28, particularly if consumer affordability weakens.

On valuations, HSBC said stocks across its coverage universe trade at premiums to historical averages. Two-wheeler manufacturers appear significantly more expensive than passenger vehicle makers.

Over the next one to two years, the brokerage prefers companies with reasonable valuations, diversified and defensive revenue profiles, and strong long-term structural growth drivers.