Auto firms ring up higher net sales, profits in Q4

Semiconductor shortage and high commodity prices dent margins

- SHALLY SETH MOHILE

Aggregate net sales and net profits of auto companies rose 12 per cent and 15 per cent, respectively, year-on-year in the quarter-ended March even as the chip shortage, a steep increase in raw material prices, and the demand slowdown facing a few segments have crimped margins.

Automakers expect margins to remain under pressure because the chip shortage is unlikely to be resolved anytime soon and may prevent them from leveraging scale.

A persistent inflationary trend will also continue to mount pressure.

Even as strong demand in the passenger vehicle market may help the industry cross 3.4 million units (last seen FY19) in FY23, "the semiconductor situation is still uncertain" and is a hindrance in tapping the full demand potential, Shailesh Chandra, managing director, Tata Motors Passenger Vehicles and Tata Passenger Electric Mobility, said in a post-earnings investor call on May 12.

Ajay Seth, chief financial officer at Maruti Suzuki India, expressed a similar sentiment.

"Supplies of electronic components continue to be unpredictable; they might have some impact on the production in FY23 as well."