INSUBCONTINENT EXCLUSIVE:
By Anupam NagarNEW DELHI: It has not been the best of rides for Indian auto companies in recent months
While growth remains by and large healthy for commercial vehicle makers, demand for passenger vehicles has hit a major bump due to an
increase in fuel costs and insurance cost, rise in interest rates and the seasonality effect of a delayed festive season.
Raw material
cost-to-sales ratio has increased for automakers, which has trimmed margins
Volumes have moderated, raising concerns over the whole consumer discretionary play.
Analysts are uncertain about near-term demand outlook
due to the rising cost of ownership, but expect some recovery in the remainder of the financial year.
Two-wheeler, carmakers in slow
laneAmong the two-wheeler players, Hero MotoCorp reported a 3.38 per cent year-on-year decline in profit at Rs 976.28 crore for September
quarter on higher raw material costs and other expenses amid subdued demand in key markets of Kerala and West Bengal
Bajaj Auto also posted disappointing number with only 4 per cent year-on-year profit growth at Rs 1,152 crore, mainly due to a rise in
commodity prices.
Among carmakers, Maruti Suzuki India posted first-ever drop in profit after 17 quarters thanks to a spike in auto fuel
prices, higher interest rates on auto loans and weakening macroeconomic factors
said.
Global player Tata Motors reported a consolidated loss of Rs 1,048 crore for September quarter, impacted largely by disappointing
performance of Jaguar Land Rover, which reported a loss of 101 million pounds.
Ashok Leyland reported numbers that were below-estimate as
adverse mix and higher discounts hurt margins
Mahindra Mahindra fared better, reporting a net profit of Rs 1,779 crore that surpassed analyst estimates; operating margin for this
company though contracted
No festive booster Bajaj Auto said the festive season was tepid, but demand has picked up in last few days
Analysts noted that the company, at the retail level, saw double-digit growth in October as against 5 per cent expansion for the
industry.
Hero Motocorp's retail offtake during the initial few weeks of the festive season was moderate compared with that in the
previous year primarily on account of a significant increase in insurance cost, followed by the associated confusion over the coverage
amount and period in two-wheeler insurance
But the company expects positive turnaround in the sentiment and retail sales to pick up, analysts noted.
Maruti Suzuki management said the
festive season was largely tepid, owing to increased insurance costs
The company expects exports to degrow over FY19 owing to currency devaluation import restrictions issues in key markets.
Tata Motors sees
some liquidity constraints in the commercial vehicle system, while the overall fundamental drivers for the sector remain strong.
How have
auto stocks fared so farShares of automobile companies are down up to 30 per cent in the last months
Tata Motors has tumbled the most with a 31 per cent fall, followed by Mahindra Mahindra (down 20.42 per cent), Maruti Suzuki (down 18.19
per cent), Hero MotoCorp and Bajaj Auto (down 5.06 per cent).
The BSE Sensex has dropped 8 per cent during the same period
On a one-year basis, Tata Motors suffered the most with a fall of 56.94 per cent, followed by Bajaj Auto (21.82 per cent), Hero Moto Corp
(20.26 per cent) and Maruti Suzuki (12.51 per cent)
Following the Q2 results, some auto majors have seen their trailing 12-month earnings per share fall sharply, data compiled by ETIG
Tata Motors saw its trailing EPS retreat by Rs 12.2, while that of Maruti Suzuki fell Rs 8.1, the data showed.
Are valuations factoring in
slowdown According to an Emkay global report, the automobile sector is facing near-term concerns due to rising cost of ownership and
selective financing by some NBFCs, which has led to tapering of volume growth in recent months.
It believes the concerns are temporary and
The report suggests Maruti Suzuki and Mahindra Mahindra as its top picks.
Kunj Bansal, Partner CIO at Acepro Advisors, said only
commercial vehicles have continued to show good volume growth
Passenger vehicles last three months have seen a sharp decline in the growth, although two wheelers have done okay
He believes that currency volatility would be over and there should be some recovery coming in December quarter.
Market expert Ajay Bagga
says one should follow a wait-and-watch approach as December is normally a very subdued quarter
to have disappointed in the recent quarter but my sense is that it is just a passing phase and the period of high single digit, low
two-wheelers where Bajaj Auto and Hero have come back to the low double-digit, mid teens kind of volume growth in the last few months and
commercial vehicles too have been the domestic volumes for Ashok Leyland and Tata Motors seem to be showing a healthy trend," he said.
