Maruti Suzuki Misses Profit Forecast on High Raw Material Costs

Maruti Suzuki India Ltd., the country's leading automobile manufacturer, reported a significant miss in its quarterly profit, falling short of analysts' expectations. The company's net profit for the quarter ended December 2024 stood at Rs 3,878 crore, a 48% increase year-on-year, but still below the consensus estimate of Rs 3,973.4 crore. Revenue for the quarter was Rs 38,764 crore, up 16% year-on-year, but slightly lower than the expected Rs 38,838 crore. The company's share price fell post the earnings report, trading down 0.6% at Rs 12,056 on NSE.

The primary reason for the profit miss was the surge in raw material costs, which have been a significant challenge for the automobile industry. Maruti Suzuki's cost of revenue increased by 11.25% year-on-year to Rs 1,028,830 crore, reflecting the higher input costs. The company's gross margin, which stood at 29.15% in the previous quarter, fell to 28.77% in the quarter under review. Operating margin also decreased from 9.43% to 9.15%.

Maruti Suzuki has been implementing various strategies to mitigate the impact of high raw material costs on its profitability. The company announced a price increase for several of its car models in India, effective February 1, 2025, to offset the rising input costs. Additionally, Maruti Suzuki has been focusing on increasing its exports to generate revenue from international markets with potentially lower raw material costs. In the quarter ended December 2024, Maruti Suzuki's exports hit a record 99,220 units, marking its highest-ever exports in a single quarter.

However, the increase in raw material costs has put pressure on Maruti Suzuki's profit margins. In the quarter under review, the company's profit margin fell to 9.15% from 9.43% in the previous quarter. This decline in profit margins can be attributed to the increase in raw material costs, which have been a significant challenge for the automobile industry.

Maruti Suzuki's competitors have also been grappling with the increase in raw material costs. Honda and Tata Motors have both announced price increases for their models in India, effective February 1, 2025, to offset the rising input costs. Maruti Suzuki can learn from these competitors by being transparent about the reasons for any price increases and the extent to which they will affect customers. The company can also explore alternative sourcing options or cost-saving measures to mitigate the impact of raw material cost increases.

In conclusion, Maruti Suzuki's profit miss in the quarter ended December 2024 can be attributed to the surge in raw material costs, which have been a significant challenge for the automobile industry. The company has been implementing various strategies to mitigate the impact of high raw material costs on its profitability, such as price increases and increased exports. However, the increase in raw material costs has put pressure on Maruti Suzuki's profit margins, which have been declining over the past few quarters. The company can learn from its competitors by being transparent about price increases and exploring alternative sourcing options or cost-saving measures to mitigate the impact of raw material cost increases.