 "Sales volumes point to lower revenue growth for Q1")
Despite having raised prices, India's largest automobile companies will see muted revenue growth in the June quarter due to the steep fall in volumes, as well as increase in discounts. While discounts have risen in the June quarter compared to the March quarter, volumes across segments have been sluggish in recent months. Passenger vehicle sales were down seven per cent, commercial vehicle sales fell 21 per cent, and two-wheelers slid three per cent, year-on-year.
Maruti has had to dole out additional discounts, given the overall slowdown, as well as new launches from competition. Such has been the extent of slowdown that companies are offering discounts on diesel vehicles - the fuel segment which had reported good growth rates in calendar 2012 - as well.
For Maruti, what could benefit it is the narrowing price differential between diesel and petrol. Moreover, the 16 per cent depreciation of the yen vis-à-vis the rupee, compared to the year-ago quarter, will reflect positively on its profits. Maruti will gain as the benefit of indirect imports of lower raw material costs (imports by vendors in March quarter) will flow through with a lag of a quarter.
For Mahindra & Mahindra, India's largest utility vehicle (UV) maker, the going has got tougher. Its passenger vehicle portfolio recorded a steep fall of 13 per cent in June (two per cent fall for the quarter) impacted by high fuel prices, higher excise duty and competitive launches. However, the impact of the slowing UV sales is likely to be offset by the strong sales growth of 25 per cent reported by the tractor division, due to a good monsoon and increase in minimum support prices of various crops. The impact on the margins is likely to be favourable, given that tractors fetch Ebit (earnings before interest and taxes) margins of about 16 per cent, compared to auto margins of 11 per cent.
For the standalone Tata Motors, the concern largely emanates from the passenger vehicle portfolio, which saw volumes drop 43 per cent year-on-year. Its commercial vehicle portfolio has also lost seven per cent in volumes as demand dropped in a sluggish economic environment.
While the performance of two-wheeler makers Hero MotoCorp (HMC) and Bajaj Auto has been less than satisfactory, the fall has been cushioned by scooters in the case of Honda Motor Company (HMC) and three-wheelers for Bajaj. While Bajaj's motorcycle sales are down 12 per cent for the quarter due to slowdown and a strike at the Chakan plant, commercial vehicles sales (three-wheelers) are up 24 per cent, year-on-year. Given that the proportion of this high-margin segment to overall sales has increased from nine per cent a year ago to 12 per cent now, margins should perk. Given its hedges, Bajaj Auto might not be able to fully capitalise on the weakness of the rupee but the net effect of its hedges will be positive. Despite losing some share to Honda, analysts believe HMC has been doing reasonably well, grossing 500,000 units a month.
Maruti has had to dole out additional discounts, given the overall slowdown, as well as new launches from competition. Such has been the extent of slowdown that companies are offering discounts on diesel vehicles - the fuel segment which had reported good growth rates in calendar 2012 - as well.
For Maruti, what could benefit it is the narrowing price differential between diesel and petrol. Moreover, the 16 per cent depreciation of the yen vis-à-vis the rupee, compared to the year-ago quarter, will reflect positively on its profits. Maruti will gain as the benefit of indirect imports of lower raw material costs (imports by vendors in March quarter) will flow through with a lag of a quarter.
For Mahindra & Mahindra, India's largest utility vehicle (UV) maker, the going has got tougher. Its passenger vehicle portfolio recorded a steep fall of 13 per cent in June (two per cent fall for the quarter) impacted by high fuel prices, higher excise duty and competitive launches. However, the impact of the slowing UV sales is likely to be offset by the strong sales growth of 25 per cent reported by the tractor division, due to a good monsoon and increase in minimum support prices of various crops. The impact on the margins is likely to be favourable, given that tractors fetch Ebit (earnings before interest and taxes) margins of about 16 per cent, compared to auto margins of 11 per cent.
For the standalone Tata Motors, the concern largely emanates from the passenger vehicle portfolio, which saw volumes drop 43 per cent year-on-year. Its commercial vehicle portfolio has also lost seven per cent in volumes as demand dropped in a sluggish economic environment.
While the performance of two-wheeler makers Hero MotoCorp (HMC) and Bajaj Auto has been less than satisfactory, the fall has been cushioned by scooters in the case of Honda Motor Company (HMC) and three-wheelers for Bajaj. While Bajaj's motorcycle sales are down 12 per cent for the quarter due to slowdown and a strike at the Chakan plant, commercial vehicles sales (three-wheelers) are up 24 per cent, year-on-year. Given that the proportion of this high-margin segment to overall sales has increased from nine per cent a year ago to 12 per cent now, margins should perk. Given its hedges, Bajaj Auto might not be able to fully capitalise on the weakness of the rupee but the net effect of its hedges will be positive. Despite losing some share to Honda, analysts believe HMC has been doing reasonably well, grossing 500,000 units a month.