Down now, auto index turnaround expected in festive season
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.