Automakers reporting strong revenue growth

Owing to the strong economy and the growing demand for vehicles, the Indian automakers are now registering strong quarterly revenue growth. However with the increasing prices of the commodities and the borrowing getting costlier, there is a risk to these profit margins in the coming months. Greater competition from those companies which are constantly expanding their operations in China, the world's fastest growing major economy and also the higher costs related to tougher emission norms and rising prices of raw materials pose worries for car manufacturers.

Arun Kejriwal, director with research firm KRIS, said that the companies will walk a tightrope and  they will have to increase prices and they all just hope that it does not affect the demand. The company is also facing pressure from its competitors like Hyundai Motors which is the second-largest car maker in India.

Toyota also aims to treble its sales in India by the year 2011. According to Kaushal Maroo, auto analyst with Religare Enterprises, the input costs and expenses are likely to see about 90 to 100 basis points decline in marginsdue to changes in emission norms, quarter-on-quarter for the sector.

The analysts said that a straight increase in prices of steel and some other metals is seen pressurising the margins by about 80 to 200 basis points in the June quarter from the previous two quarters. According to Kejriwal, vehicle makers have had to increase prices to offset increase in raw material costs and they just hope that it will not affect the demand.