Down now, auto in­dex turnaround ex­pected in fes­tive sea­son

Financial Chronicle - - RISING METTAL STOCKS -

WITH com­mod­ity prices on the rise, the BSE Auto In­dex has been mov­ing side­wise as higher in­put cost could hit mar­gins of the auto com­pa­nies.

Over the past month, when metal prices were on the rise, the Auto In­dex un­der­per­formed the Sen­sex de­spite a price hike ef­fected by most of the com­pa­nies.

Com­pa­nies have hiked prices by 3-5 per cent across the prod­uct range to off­set the cost in­creases. Ac­cord­ing to ex­perts, strong de­mand has also helped com­pa­nies to pass on the cost in­crease.

It is es­ti­mated that for about a fourth of auto firms, raw ma­te­rial costs are linked to me­tals. In the June quar­ter, op­er­at­ing mar­gins of most of the com­pa­nies were hit by about 100-200 ba­sis points due to higher in­put cost com­pared to the year-ago pe­riod.

How­ever, com­pa­nies have seen good sales num­bers in both July and Au­gust and it is ex­pected that the com­ing months will see new launches and lower dis­counts es­pe­cially in the fes­ti­val sea­son which may off­set the in­put cost in­creases, an­a­lysts said.

Do­mes­tic two-wheeler (2W) vol­umes for Au­gust 2017 grew by an es­ti­mated 16 per cent YoY driven by both scoot­ers (+19 per cent YoY) and mo­tor­cy­cles (+14 per cent YoY). YTD vol­ume growth for 2W in­dus­try at 11 per cent YoY is cur­rently run­ning be­hind FY18 growth fore­cast of 12.6 per cent, say ex­perts. Ma­jor car manufacturers saw good vol­ume growth in Au­gust as fes­tive sea­son de­mand seems to be en­cour­ag­ing. Maruti Suzuki vol­umes grew 24 per cent YoY to 1,64,000 units. Vol­ume growth was seen mainly in the com­pact and UV seg­ments, which grew 52 per cent.

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