Why India's automobile sector faced margin squeeze in Q1
What's the story
India's automotive sector witnessed strong topline growth during the first quarter of the fiscal year, driven by record sales. However, rising input costs, supply chain disruptions, and delayed price adjustments have led to a widespread contraction in margins. A quarterly review report by HDFC Securities shows that 14 out of the 19 automobile and ancillary companies tracked witnessed a year-on-year decline in their operating EBITDA margins. This happened despite sustained demand across all vehicle segments.
Market leaders
Maruti Suzuki India and M&M
Maruti Suzuki India topped the revenue charts with a 36.6% year-on-year rise in net sales to ₹52,456 crore.
However, its EBITDA margin contracted by 219 basis points to 8.2% from 10.4% in the same quarter last fiscal year.
Mahindra & Mahindra Ltd (M&M) also faced similar margin pressure despite a 23% rise in net sales to ₹41,920 crore, and an EBITDA margin contraction of 214 basis points year-on-year to 12.2%.
Margin challenges
Tata Motors Passenger Vehicles and Hero MotoCorp
Tata Motors Passenger Vehicles's EBITDA margin fell by 225 basis points year-on-year to 6.6%.
This was due to weak demand for Jaguar Land Rover in China and higher domestic commodity under-recoveries.
Hero MotoCorp also witnessed a year-on-year contraction of its EBITDA margin by 115 basis points to end at 13.3%.
Further contractions
Ashok Leyland and Hyundai Motor India
Commercial vehicle manufacturer Ashok Leyland reported a year-on-year decline in its EBITDA margin by 105 basis points to 10.1%. Meanwhile, Hyundai Motor India witnessed a contraction of 406 basis points to 9.3%, owing to component supply disruptions and West Asia export headwinds.