With a spectacular 30 percent growth during 2010-11, this year the auto companies have been hit hard because of costly fuel, costly raw materials and costly loan. Though 2 wheelers utility vehicle & commercial vehicles sales are pretty much in line but the passenger car segment has seen a hit.
According to Indian Auto Manufacturers data in the month of September the commercial vehicle sales rose by 18 percent where as bikes sales rose by about 20 percent. The Passenger car sales had a different story they declined by 1.8 percent. Though many companies came out with incentives such as free accessories, discounts, extended warranties, free insurance etc but it failed. The margins were strongly hit because of high promotion cost as well as high input costs.
All the big broking firms have downgraded EBITA margins for these auto companies. Most of the analysts are of their opinion that this year the operating margin of all auto companies will remain low on account of increase in its raw material cost & weak operating leverage. Though these companies had tried hard to push their sales through discounts this festival season but were not able to suceed. We have seen a strong demand for 2 wheelers light vehicles and tractors. This will increase the overall sales growth of auto sector by 12-17 percent YOY in 2nd quarter. Markets are expecting good results from Hero MotoCorp & Bajaj Auto with double digit earnings whereas Maruti Suzuki & Tata Motors would post a decline in profits in the 2nd quarter.
“Bell the bull says: in the long term the Auto companies seems to be bullish.”