Indian auto makers are expected to post better quarterly profits on robust sales, but the high cost of fuel and inputs such as steel will weigh on margins, though their impact may ease in the next quarters.
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Reuters said top car maker Maruti Udyog and number two motorcycle maker Bajaj Auto are forecast to report the best earnings growth among their peers on new launches and sales of higher-value products.
“The second quarter was marked by strong volume growth in the two-wheeler segment and a revival in four-wheeler sales,” ASK-Raymond James reportedly said in a client note.
“A surge in sales volume, better product mix and easing input price pressure would enable operating margins to improve on a sequential basis,” it said.
High prices of oil, steel, rubber and plastic, tougher pollution rules and a new tax that took effect in April drove up costs and slowed sales of cars and commercial vehicles in the first quarter in India’s $IS15 billion vehicles market, Reuters said.
But a good monsoon, robust sales in the festive season, new launches and a pick-up in construction activity on a national highway network are expected to drive sales of motorcycles, cars, buses and trucks in Asia’s third-largest economy, the report added.
Maruti, which is 54.2%-owned by Suzuki Motor, is expected to report a 32% rise in net profit to 2.43 billion rupees ($54 million) in July-September, according to a Reuters poll of 13 brokerages.
Tata Motors and rival truck maker Ashok Leyland are also expected to post higher profits than a year ago.
Mahindra and Mahindra Ltd., which has a deal with Navistar’s International Truck and Engine Corp. to make buses and trucks, is likely to report 12% profit growth, the report added.
