Auto firms: Mixed signals

With the Splendour and Passion Plus models doing well, the Rs 10, 331 crore Hero Honda is likely to be a star performer in the September 2008 quarter, having sold 27-28 per cent more. In the June 2008 quarter, India’s biggest motorcycle maker posted a sales growth of 16 per cent and an operating margin of 12 per cent.

The bike maker has an edge over competitors because many of its customers do not opt for financing schemes. Also, its sales are not skewed towards either urban or rural markets, which is probably why it has weathered the downturn in the industry better than its peers. What’s more, it has been able to increase prices by about Rs850 in August.

Bajaj Auto, on the other hand, is losing market share--- volumes grew by just 6 per cent in September and by about 8 per cent between April-September 2008. With three-wheeler sales also declining, the September quarter could see the firm posting muted revenue growth. Also, since costs would not have come off significantly, operating profit margins are expected to be under pressure. Bajaj launched the Platina 125 cc recently and is looking to grow in this highly competitive segment.

Despite the Swift, Dzire and the SX4 doing well, India’s biggest car maker, the Rs 18,259 crore Maruti Suzuki’s September quarter numbers may be somewhat disappointing because small car volumes fell nearly 4 per cent. Revenues for the firm could remain flat while operating margins may come off because prices of steel and aluminium remain high compared with 2007.

In the June quarter, margins had come off by 500 basis points to just under 10 per cent. The launch of the A-Star, later in the year, should help revive volumes. Rival Hyundai Motor, meanwhile, has been on a roll with volumes up by 34 per cent in July and 24 per cent in August.

It hasn’t been easy for Mahindra and Mahindra; volumes for utility vehicles -- Bolero and Scorpio ---stayed weak for most of the quarter, though business was better in September. The just launched Scorpio Automatic should find takers in the festive season as should the Ingenio later in the year. Tractor sales were weak --- down 6 per cent in September, which is an inauspicious month.

Thus, revenues for M&M could grow by about 10 per cent though high raw material costs may dent margins by about 100-130 basis points. With sales of heavy and medium commercial vehicles not picking up and volumes for passenger cars seeing a dip, Tata Motors’s revenues will possibly grow in single digits. Again, raw material pressures could keep operating profit margins down—analysts believe they could contract by about 80-100 basis points.