Maruti Suzuki has implemented a weighted average price increase of around 0.5% across its model range, effective August 18, following a price hike of approximately 0.4% announced in mid June, according to Nomura. The latest increase takes the automaker's cumulative price hikes in FY27 to around 0.9%.

The price increases remain below the broader cost pressures faced by the company. Nomura estimates that input cost pressures exceeded 300 basis points in the first quarter, driven by higher commodity prices. Although the brokerage's raw material cost index remained flat quarter on quarter in its second quarter FY27 forecast, it expects the residual impact of higher rubber, copper, energy and vendor labour costs to continue affecting original equipment manufacturers with a lag.

Nomura believes Maruti Suzuki may need to undertake additional price increases of around 150 to 200 basis points to support consensus EBITDA margin estimates of 10.5%, 11.8% and 11.9% for FY27, FY28 and FY29 respectively. The brokerage said the company appears to be following a strategy of taking calibrated price increases over time to limit the impact on demand.

Dealer feedback indicates that demand remains strong, although Nomura will closely monitor the impact of higher vehicle prices and inflation on the small car segment, where consumers are relatively more price sensitive. If inventory levels increase, dealerships could also resort to higher discounts, potentially limiting the benefit of price increases on margins.

Hyundai Motor has separately announced a price increase of up to 1%, effective September 2026, indicating that cost pressures are being addressed across the passenger vehicle industry.

Over the medium term, Nomura sees increasing electric vehicle adoption as a key market share risk for Maruti Suzuki. Industry passenger vehicle EV penetration has increased to around 7%, while Maruti's EV market share is expected to remain significantly below 40%. A faster-than-expected acceleration in EV adoption could therefore increase competitive pressure on the company.

Nomura maintained its target price of Rs 14,071 for Maruti Suzuki, based on 23 times the average FY28 and FY29 core earnings per share. The stock currently trades at around 26 times FY28 core earnings. The brokerage continues to prefer Mahindra and Mahindra and Hyundai Motor among four wheeler original equipment manufacturers.

Potential upside risks include stronger vehicle demand following benefits from the 8th Pay Commission in FY28 and a moderation in commodity prices. Key downside risks include the inability to fully pass on cost increases, higher discounts and potential loss of market share.