The sharp drop in profits, 23 per cent, for Maruti Suzuki India Limited (MSIL) in the first quarter of 2012-13 — combined with the lockout at its Manesar plant — has focused attention on India’s auto sector. Is it struggling? As Table 1 shows, it has seen something of a slight slowdown since March this year — mainly reflecting weakness in the domestic market since exports are still a small proportion of its output. However, as Table 2 shows, some segments are doing worse than others. Demand for motorcycles is still robust, while that for passenger cars has declined sharply. Commercial vehicles have also seen a sharp drop-off, suggesting broader problems for the economy ahead.
Two- and three-wheeler companies are still doing well, therefore, as Table 3 shows, with margins steady. Matters are more chaotic for the car and truck-makers, shown in Table 4 — though Mahindra & Mahindra and Tata Motors outperformed MSIL on margins even before the latest results. However, MSIL’s share price has done relatively well this year, as Table 5 shows. Eicher’s steady margins have accompanied a sustained increase in its share price this year.
The component industry is more globalised, perhaps, than the rest of the auto industry. However, exports as a percentage of turnover took a sharp dip following the financial crisis, as Table 6 shows, from which it is yet to recover. The same table lays out what industry bodies expect — that the components industry will grow sharply in years to come on the back of increased exports.(Clcik here for tables)
However, given that its largest export destination continues to be troubled Europe, the sector will require speedy reorientation if it is to grow as its manufacturers hope.
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