Cost pressure: Carmakers see strong sales but lower profits
Rising Commodity Prices, Adverse Forex Movements Take Toll
Automobile manufacturers in India are experiencing robust sales but declining profits, despite global economic challenges. Rising commodity costs, unfavorable currency fluctuations, and production interruptions are significantly impacting profit margins for some of the country's leading passenger car producers, even as demand remains high.
Maruti Suzuki, the country's largest vehicle maker, witnessed a 29.3% year-on-year surge in sales volume, reaching a record 6.8 lakh units in the June quarter. Sales grew by 36% to Rs 49,959 crore. However, the company's net profit dropped 10.8% to Rs 3,352 crore. Operating EBITDA also declined by 6.7%, and the margin contracted to 8.6% from 12.6% a year ago.
Higher sales volumes typically provide operating leverage, but in the present scenario, a portion of the advantage is being consumed by escalating input costs, according to Ravi Bhatia, director at Jato Dynamics.
Puneet Gupta, director at S&P Global Mobility, noted that commodity prices have surged, with copper up around 20% and aluminium around 15%. Logistics and other costs have also increased. Automakers are absorbing a large share of these hikes rather than passing them on fully to consumers to maintain sales momentum. Maruti has cited material cost hikes during the quarter and the impact of the West Asia conflict as contributing factors.
Additionally, Tata Motors Passenger Vehicles reported a 46% volume increase and a 64.8% revenue rise to Rs 17,900 crore, while its EBITDA margin stood at 4.3%.
Written by urgent.news from Times of India's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
