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› The highest sales growth in past 10 years was in FY04 the major reason for it was a 56%
growth in exports from 2003 to 2004. Sales in FY04 had grown by 62.4% of which four
wheeler segment has shown a growth of 77.52% and two wheeler by 20.39%,
introduction of new models as well as variants coupled with easy availability of low cost
finance with comfortable repayment options continued to drive demand and sales of
automobiles during the first two quarters of FY04.
› Since the beginning of 2008, Auto companies had been reeling under the pressures of
high input costs, which were impacting their profitability, high Interest rates, which were
affecting consumer affordability, and liquidity constraints, which were affecting
consumer demand; all of these had adversely impacted the Volume Sales of the Industry.
This coincided with the global economic setback, leading to a considerable slowdown in
Indian Auto exports. Thus, the dwindling domestic demand and the retarded global
demand delivered a double-whammy, and impacted the fortunes of the industry. This
year was marked as the lowest sales growth year with growth of only 2.7% of which four
wheeler segment had grown by only 17.41% and two wheeler has grown by 4.10%. The
total expenditure in the same year had grown only by 4.1%.
› ÿowever, the auto industry has been turning around, the healthy sales numbers reported
by most automobile companies for FY¶10 has clearly indicated a robust demand
environment.
› The Automobile sector in terms of revenue has grown from Rs.772409.9mn (in FY¶06)
to Rs.1902135.08mn (in FY¶10) in past 5 years which implies that it has grown 2.5 times,
Tata Motors has increased its sales by 3.5 times, M&M and Maruti Suzuki grew by 2.5
times and twice the sales in past 5 years respectively.
› Sales of Escorts is zero from the FY¶04.
› In a price-competitive space, the cost structure is highly critical. The rise in commodity
prices over the last few years was on account of the steady demand and cost-push
inflation. The average price of raw materials grew at a CAGR of around 20.86% for the
auto industry (normally at 60-70% of Sales), during FY2006-10. The raw material cost of
the sector had increased by 34.9% in FY¶09 mainly because of the credit crunch which
placed pressure on the prices of raw materials. Tata Motors raw material cost increased
by 93.8% due to the purchase of raw materials and purchase of trading goods had
increased by 2 to 3 times. In FY2010 raw material cost of sector had grown only by
30.1%.
› Raw Material to net sales is on an average 67.26% in the past 10 years.
› The total expenditure of Auto sector was highest in the year FY¶04 (53.5%) because sales
had grown by 62.4% in the same year. Even in FY¶09 total expenditure had grown by
43%. In FY¶09 Tata Motors had increased their expenditure by 117.8% which was
mainly because of the increase in raw material cost, employee cost and selling and
administrative expenses. Total expenditure was lowest in the FY¶08 due to economic
crisis.
› Total Expenditure to gross sales is on an average 81% of the past 10 years.
› The increase in costs had an impact on Operating Margins over the past few years. In
FY¶09 operating margin was only 7.9% which was lowest in the past 10 years i.e. there
was a fall of approximately 5% as compared to the previous year. Operating Margins of
TVS Motors and Tata Motors had fallen around 3%. On an average the operating margins
have remained steady throughout the years.
› In FY10, the operating profit margin of industry grew by 13% compared to 7.9% in
FY09.Which shows that a good proportion of a company's revenue is left over after
paying for variable costs of production such as wages, raw materials, etc. Tata Motors
operating profit margin has grown by 287.54% and at the same time Bajaj Auto operating
margin increased by 130.98% as compared to the previous year.
› Interest paid by the auto sector had increased by 74.60% in FY¶09 which was highest in
past 10 years. This increase is mainly because of the increase in the debt of Ashok
Leyland, Tata Motors (due to acquisition of Jaguar and Land Rover) and TVS Motors.
The debt was increased by twice the amount in the previous year. Tata Motors had raised
Rs.8500 Mn from banks and cash credit had doubled. In FY¶10 the interest paid has only
increased by 6.33% as the debt has remained steady as compared to the previous year.
› The Net profit margin of the sector was 7.6% in the FY¶06 of which M&M had a net
profit margin of 11%. In FY¶09 net profit margin of the auto sector had fallen to 1.1%
because there was a negative net profit margin of Tata Motors, TVS Motors and ÿMT.
› Net profit margin of ÿMT in the past ten years has remained negative. Its raw material
cost and employee cost is more than the sales. Total expenditure to gross sales on an
average of past 10 years is 143.2%.
› In FY¶10 Bajaj Auto has a higher net profit margin of 14.7% which increased by 73% as
compared to the previous year. This was possible because its interest payments were
fallen by 3.5 times. Which indicates it is a more profitable company that has better
control over its costs compared to its competitors. In four wheelers M&M has net profit
margin of 9.2%.
› Earnings per share of ÿero ÿonda is 93.18 which is highest in the sector followed by
Maruti Suzuki whose EPS is 89.82 which has been doubled as compared to the previous
year. In the FY04 EPS of Ashok Leyland was 15.32 and after that EPS of it has on an
average been revolving around 2.5.