Auto Sector Check: Commodity Cost Inflation To Reflect From Q3 Onwards, Says Motilal Oswal
Traffic drives through a road in Chennai, Tamil Nadu, India. (Photographer Prashanth Vishwanathan/Bloomberg)

Auto Sector Check: Commodity Cost Inflation To Reflect From Q3 Onwards, Says Motilal Oswal

BQ Blue’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BloombergQuint’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.

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 -

  1. price increases (of 1-6% in two-wheelers, tractors, and passenger vehicles),
  2. lower discounts (100-400 basis point across segments),
  3. cost-cutting , and
  4. operating leverage.

Click on the attachment to read the full report:

Motilal Oswal Auto Sector Update.pdf

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