Kotak Securities recently published a report on the Indian automobile sector where they predicted that automotive volume growth will likely remain subdued, increasing 8-12% yoy in FY2013E as they saw no visible triggers for demand to grow at a higher rate than the 10-year CAGR (12-15%). They believe that low GDP growth, likely increase in fuel prices and excise duties are all likely to put pressure on automotive volume growth. EBITDA margins for auto companies are unlikely to improve year over year in FY2013E except for Maruti Suzuki (as margins were impacted by a significant decline in demand in FY2012E) as commodity cost pressure is likely to persist and there is no let up in competitive pressures. Customers should be relieved because since volume growth is unlikely to be very strong, auto companies will find it difficult to pass on input cost pressures to consumers.
Download the full report here.