Cost pressure: Carmakers see strong sales but lower profits
Major Indian automakers are experiencing strong sales volumes but facing declining profit margins due to rising commodity costs and supply chain disruptions. Companies like Maruti Suzuki and Tata Motors are absorbing these costs rather than passing them fully to consumers to maintain market momentum.
Why it matters
The squeeze on automotive margins highlights the vulnerability of manufacturing sectors to global commodity price volatility and geopolitical tensions.
NEW DELHI: Carmakers are selling more vehicles, but higher volumes are not necessarily translating into fatter profits. Rising commodity costs, adverse currency movements and production disruptions are squeezing margins at some of India's biggest passenger vehicle makers even as demand remains strong.Maruti Suzuki is the clearest example. Its total sales volume jumped 29.3% year-on-year to a record over 6.8 lakh units in the June quarter, while net sales rose 36% to Rs 49,959 crore. Yet net profit fell 10.8% to Rs 3,352 crore. Operating EBITDA declined 6.7% and margin contracted to 8.6% from 12.6% a year earlier."Higher volumes normally provide operating leverage.
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