Landmark Cars · risk themes across the available quarters.
Bear-case history
After-sales revenue grew only 8% YoY while new car sales surged 22%, creating a portfolio mix shift that pressured gross margins. The lag is attributed to new workshop ramp-up timelines and Q1 seasonality (softest quarter at ~20-21% of annual contribution).
Management acknowledged pre-owned car business remains a 'mountain to climb' and has been deprioritized for 9-12 months while stabilizing core operations and new outlets. Competitors are reportedly thriving in this segment which drives throughput and service income.
Analyst asked about Tesla's Model Y launch impact; management provided minimal data (low single-digit customer switches) but lacked systematic competitive analysis. Tesla's India entry strategy and OEM support remain uncertain.
Internal data shows EVs generate approximately 86% of ICE car after-sales revenue, creating a structural headwind as EV mix (BYD, MG) grows to ~20% of business. Full impact assessment requires another 6 months of data.
Analyst flagged that Mercedes-Benz, contributing ~40% of revenue, has lost volume market share in India. Management acknowledged the trend but attributed it to global strategy prioritizing value over volumes, with 12 new model launches planned to address gaps.
Management admitted newer brands (contributing 20% of revenue) are clearly not as profitable as mature brands—some have turned profitable, others are still ramping. Analyst questioned blended group ROC post-stabilization, which management deferred to a separate discussion.
Despite guidance for 100bps improvement in H2, gross margin remained flat YoY at ~16.4%. Management attributed this to sales mix (lower-margin new car sales outpacing after-sales) and noted mathematical improvement requires after-sales contribution to rise meaningfully. Analyst pressed on this gap between guidance and execution.
Analyst raised concern that customers may postpone purchases of European CKD vehicles awaiting FTA implementation and lower CBU prices. Management countered that 92% of Mercedes sales are CKD where duty changes are minimal, though acknowledged the FTA opens new avenues for VW, Jeep, and Renault to import previously unavailable models at lower duties.
BYD faced Q4 supply constraints due to CBU quota limitations and homologation issues. While new quotas and localized models (Seal 7, AT3, M6) have arrived, execution on supply ramp-up remains critical to achieving the 'much better year' management guided for BYD.
Analyst questioned whether lower EV servicing frequency/cost will impact after-sales revenue. Management cited Goldman Sachs research showing ~12-14% revenue impact but noted accident repair (47% of service revenue) remains unaffected as EV parts/insurance costs are higher. Impact trajectory in India remains uncertain.
Multiple OEMs announced April price increases with another round expected in June. While management sees price hikes as beneficial for inventory held, the one-time gain is limited to existing stock. Ongoing margin pressure from OEM price negotiations and input cost inflation not explicitly addressed.
One unprofitable Volkswagen outlet was closed. Management stated Gujarat operations remain profitable and under evaluation, but ongoing portfolio rationalization decisions could impact revenue scale in that segment.