Auto Sector Check: Commodity Cost Inflation To Reflect From Q3 Onwards, Says Motilal Oswal
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Motilal Oswal Report
Spot prices of base commodities saw a sharp increase (15-40%) over Q2 FY21.
Considering three to six-month contracts, we expect the impact of base commodity prices to reflect in the profit and loss from Q3 FY21 onwards.
Precious metals (platinum, palladium and rhodium) are facing a double whammy of a huge increase in usage due to BS-VI compliance and a sharp rise in prices.
While cost inflation is fairly large, original equipment manufacturers are focusing on more than offsetting the same through -
- price increases (of 1-6% in two-wheelers, tractors, and passenger vehicles),
- lower discounts (100-400 basis point across segments),
- cost-cutting , and
- operating leverage.
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