Maruti Suzuki reported a 7 % fall in the first quarter of the fiscal year. Maruti’s net profit dipped from Rs 499.6 crore in the corresponding period of the last fiscal year to Rs 465.9 crore in April-June 2008. Even though the sale in the first quarter of the fiscal year rose to about 18%, the net profit skids.
What can be the reason of the low net profit? The answer is simple and straight. In the past few months, the company has witnessed depreciation of assets and spike in expenses which has eventually reduced the profit margin. High inflation and increasing material costs has forced the company to absorb some portion of the input or production costs. This action by Maruti resulted in higher number of car sales but unfortunately, the net profit of the company dipped.Another reason for the lower net profit was the extra Rs 62 crore that the company paid for the new depreciation policy. Apart from this, the company had made huge expenses in advertising and branding activities to lure waning customers during inflation. These activities helped the company register a good percentage of domestic sales but failed to earn profits.
Is this the condition for all car manufacturers or only Maruti has suffered a loss?
Labels: Car-prices, Car-Sales, Maruti Suzuki
3 Comments:
So many obstacles in the Indian market and it has disturbed its sales. Not only Maruti even Hyundai, Ford, Honda are also suffering badly and there sales have drop down tremendously. I feel that if this continues further then maybe many of the auto manufacturers with disappointment might think to shifting their business to some other country. Something must be done to help out even the auto makers
Inflation - Hikes - Expenses and Maruti. Though Maruti had a steady rise in the sale during the first quarter, still the net profit was steady fall. If this is going to be the scenario, then its going to be a steep dip for them. its high time now, the company to apply new strategies to cope up with this situation.
Its dip for maruti. When other automobile companies reported a decent volume growth in the first quarter, Maruti couldn't make it even. Inflation, jump of Raw material price has taken a large toll on the company's finances. If their core earnings are going to decline like this.. it would look too expensive for Maruti Suzuki India Ltd.
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