Carmaker Maruti Suzuki feels the squeeze

Maruti Suzuki India, the country’s top carmaker, said on Wednesday rising raw material costs had eaten into its margins despite more sales at higher prices, hurting quarterly profit which came in below analyst estimates.

Maruti recorded a profit of 10.13 billion rupees ($126.79 million) for the quarter that ended on June 30, compared with 4.41 billion rupees a year ago when production was hampered by COVID-19-related disruptions. Analysts, on average, had expected a profit of 15.95 billion rupees, according to Refinitiv data.

“The increase in prices of commodities adversely impacted the operating profit … the company was forced to increase prices of vehicles to partially offset this impact,” Maruti said in a statement.

Maruti, which sells every second car in India and is majority-owned by Japan’s Suzuki Motor, increased prices six times from January 2021 to June 2022, while cutting back on discounts as demand rebounded from pandemic lows.

Maruti’s shares rose as much as 2.1% after it reported its quarterly results.

The carmaker reported sales of 467,931 vehicles for the June quarter, up 32.3% from the same period a year ago.

However, sales could have been higher if not for a semiconductor shortage that resulted in 51,000 vehicles not being produced, Maruti said. This took its total order backlog to 280,000 vehicles at the end of the quarter.

The company’s average selling price per car during the quarter was 540,385 rupees, versus 475,057 rupees a year ago, helped by higher sales of its compact cars and sport utility vehicles (SUVs).

Earnings before interest, taxes, depreciation, and amortization margin – a key measure of profitability – stood at 7.2%. Analysts had expected an EBITDA margin of 8.8%, according to Refinitiv data.

Total revenue from operations came in at 265 billion rupees, compared with 177.71 billion rupees a year earlier.

($1 = 79.8950 Indian rupees)