The hike in the prices of raw materials has smacked many of the auto manufacturers in the first quarter of this year.
India’s leading auto maker Maruti Suzuki India Ltd. is going through a terrific slump in its profits for the first quarter 2008-09 compared to same period last year. Even after incurring high marketing costs in the form of discounts they are still incapable to increase their profits.
According to experts, “Manufacturers have not been able to pass on the entire cost increase, forcing them to absorb some of the cost pressures. There will be a limit to which the market will be able to absorb the cost increase, therefore the automobile companies are under pressure. The outlook for the market is not bright in the second quarter with new taxes on larger vehicles, the impact of fuel price hikes and further tightening of credit.
As per the estimation of five analysts, Maruti Suzuki is likely to report 6.62% drop in net profit while Tata Motors may post 18.6% decline in profit after tax, because of higher interest payments on a $3 billion bridge loan to fund the purchase of Land Rover and Jaguar and foreign exchange losses.