Thanks to healthy growth in the automotive industry, Indian automakers have achieved strong growth in their first quarter results.
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India’s biggest home-grown vehicle manufacturer Tata Motors reported a 22% rise in net profit for the first quarter. The company managed to shake off an increase in raw material costs to achieve the increase due to a spurt in truck sales.
India’s $US5 billion truck and bus market – which Tata leads – has grown 30% annually in the past three years, driven by an improving network of highways and owners replacing ageing trucks with more efficient and reliable new vehicles.
Tata’s Q1 net profit rose to INR2.73 billion from 2.23 billion a year ago. Net sales rose 8.5% to INR38.78 billion. The company also improved its operating margin to 12.6% from 12%.
While the domestic commercial vehicle market did slow down during the quarter due to buyer uncertainty caused by government changes to emission rules, Tata Motors’ exports were robust. Exports rose 74% and passenger vehicle shipments were up 241% (though from a very small base), with new markets such as South Africa and Turkey driving the growth. Tata now owns South Korea’s Daewoo commercial vehicle operation and aims to boost foreign sales to 15-20% of revenue in the next three years, up from the current 8%.
Europe will be a target area, with Italy the top market. Tata owns 21% of Spanish bus maker Hispano Carrocera, which has recently bagged a big order for 800 buses in a European market.
Tata’s commercial vehicle rival Ashok Leyland, meanwhile, doubled net profit, although some came from the included proceeds of the sale of a castings unit to another group company.
India’s biggest car manufacturer, Maruti, reported a 32.5% rise in net profit for the quarter of INR 22.6 billion. The company has been enjoying healthy demand for its ‘bread-and-butter’ Suzuki-designed Alto while the new, fully redesigned Swift hatchback has received a very favourable response from buyers – the waiting list is up to 100 days long.
The profit rise came even though the company reported a 1.4% decline in overall sales for the April-June ’05 quarter. On the other hand, Maruti gained from a healthy 31.6% rise in sales in the A2 market segment which where it sells most of its models.
Utility vehicle manufacturer Mahindra & Mahindra posted a 40% growth in net profit of INR14.53 billion for the first quarter of the fiscal year ended June 30. The company has recently entered a number of export markets with its Scorpio and Bolero utility vehicles.
Deepesh Rathore / Tilak Swarup
