Earnings Analysis: Auto firms pulled their brakes in Q3; analysts say Q4, too, holds little hope

Mumbai: Auto firms had a disappointing December quarter on the back of low demand, thanks to h igh fuel and insurance costs and a liquidity squeeze in the economy. The outlook for March quarter, too, looks gloomy.

“Auto sector results were off expectations,” said Arun Thukral, managing director & CEO, Axis Securities. “The liquidity crisis and an increase in the cost of ownership impacted demand while high raw material costs put pressure on margins,” he said.

Motilal Oswal Securities said auto demand was impacted by fuel inflation and a rise in insurance cost, weak buying sentiment in rural areas and liquidity crunch.

The brokerage said Ebitda (earnings before interest, tax, depreciation and amortization) margins of stocks in its auto universe, excluding Jaguar Land Rover, shrank by 230 basis points year on year to 11.7 per cent, impacted by raw material inflation, negative operating leverage and higher other expenses for new product launches, but this has been partially offset by price hikes. One basis point is one-hundredth of a percentage point.

Tata MotorsNSE -1.06 % reported its biggest-ever quarterly loss of Rs 26,960 crore for December quarter, hit by one-time asset impairment at its struggling British arm JLR . This was also the third consecutive quarterly loss for the company.

Top car maker Maruti SuzukiNSE -0.02 % reported a 17.2 per cent drop in net profit for third quarter, as expenses towards raw materials, marketing and sales increased, and it took a hit from adverse foreign exchange movements.

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