India's four-wheeler sector may post a flat profit growth in the first quarter due to a rise in input costs. The cost of automobile steel, which constitutes about 40 per cent of the total raw materials, rose by more than 25 per cent during the three-month period. Prices of raw materials like aluminium, copper, rubber and fuel also appreciated significantly.
The profits of automobile companies may also be hurt by foreign exchange losses resulting from the weak rupee. Bajaj Auto took a hit of Rs 98 crore (Rs 980 million) on the forward covers used to hedge future exports.
Automobile companies, however, may still be able to maintain the profits because of productivity improvement and cost reductions programmes.
The revenues are expected to rise in the June quarter as customers bought vehicles ahead of festivals including Gudi Padwa, Baishakhi, Akshay Tritya and also a marriage season. The anticipation of a price hike also helped the sales of Maruti, Tata Motors and Hero Honda.
Car sales gained more than 15 per cent and two wheeler sales rose 7 per cent in the first quarter, compared to a growth of 9 per cent and decline of 9 per cent respectively in the previous quarter.
Maruti Suzuki, Hyundai and Tata Motors raised the prices by 2-3 per cent each.
Maruti Suzuki, the country's largest car maker, said its profit rose 3 per cent to Rs 513 crore (Rs 5.13 billion) compared with Rs 499 crore (Rs 4.99 billion) a year earlier, helped by cost-cutting measures, improved productivity and localisation.
"We expect the margins to be lower by 170 basis points on account of discounts, promotional offers and increased steel prices," Amit Kasat, an analyst with Motilal Oswal wrote in his report.
The New Delhi-based company reported a 12.13 per cent increase in sales to 180,000 units during the three-month period. However, the sales grew by a mere 0.73 per cent in June due to the fierce competition from Hyundai and General Motors.
Tata Motors, the country's third biggest passenger vehicle maker, has seen better growth during the reporting quarter as sales grew by more than 11 per cent at 57,862 units against the corresponding quarter of the previous year. The surge in sales was largely aided by the new model Indigo CS.
The company's net profit may see a dip because of the absence of forex gain factored in the corresponding quarter of last year, according to a poll of analysts. The company reported a Rs 205 crore (Rs 2.05 billion) forex gain in the corresponding quarter a year ago.
Analysts expect utility vehicle volumes to be the biggest growth drivers in the coming months, primarily due to the newly launched Sumo Grande.
