Profits elude most foreign carmakers

Nov 18 2013, 05:31 IST
Comments 0
Foreign carmakers like Honda, Toyota, Ford, General Motors and Skoda, which have manufacturing bases in India, are yet to turn profitable Foreign carmakers like Honda, Toyota, Ford, General Motors and Skoda, which have manufacturing bases in India, are yet to turn profitable
SummaryAccumulated losses in India jump 20% in FY13

Foreign carmakers like Honda, Toyota, Ford, General Motors and Skoda, which have manufacturing bases in India, are yet to turn profitable. In fact, the almost yearlong slowdown in demand for cars has seen their accumulated losses jump around 20% in FY13 to approximately R6,500 crore compared with the previous year, data from the Registrar of Companies (RoC) and industry estimates show.

Industry analysts said apart from slowing sales, these companies also face the high cost of competing with strongly-placed incumbents like Maruti Suzuki and Hyundai.

Honda Cars was the worst hit, with a net loss of R1,110 crore in FY13 — 84% higher than FY12 despite a 35% jump in volumes, according to data available with the RoC. Toyota Kirloskar and Skoda Auto posted losses of R6 crore and R85 crore, respectively, during the year. Other large players like Ford, Volkswagen, General Motors and Renault are yet to submit their number to the RoC. Barring Volkswagen, all others had recorded losses in FY12 as well.

VG Ramakrishnan, MD at Frost & Sullivan, South Asia, said Honda has taken a major hit due to currency depreciation. But he added that global carmakers have deep pockets and will continue to fund losses with an eye on profits in the longer term. “Most companies have made huge investments in capacity in order to achieve scale, but that is not commensurate with their volumes. When they invested, they did not imagine a 2-3% market share but all carmakers know that they have to be present in India — it is one of the few markets in the world that can potentially reach a size of 7-8 million units annually,” he said. The 2.7-million-unit domestic passenger vehicle market grew 2% in FY13, but has recorded a 4.6% drop in April-October FY14.

At present only a select few foreign carmakers are profitable in India. Hyundai, the second-largest player in the country with a 15% market share and one of the oldest to start local operations (1996), recorded a 5.27% higher profit at Rs 836.2 crore in FY12 — its FY13 profit is not available yet. Meanwhile, Nissan in FY13 also emerged from its FY12 losses of Rs 467 crore, with a Rs 312-crore profit.

Almost 75% of the domestic market comprises Maruti Suzuki, Hyundai, Mahindra and Tata Motors.

Under pressure from competitively-priced products from rivals, many of the new entrants are also opting to sell cars at a loss,

Single Page Format
Ads by Google
Reader´s Comments
| Post a Comment
Please Wait while comments are loading...