Maruti Suzuki Profit Falls Short Amid Rising Costs, Shares Drop

Maruti Suzuki India, India's top automaker by market share, has reported lower-than-expected quarterly profits due to soaring raw material prices, leading to a decline in its share value.

Net income increased by 13% to 35.3 billion rupees ($408 million) in the three months ending December 31st, year-over-year, according to an exchange filing by the Suzuki Motor Corp. subsidiary on Wednesday. However, this fell short of Bloomberg's average analyst estimate of 36.04 billion rupees.

Revenue rose by 16% to 384.9 billion rupees, closely aligning with analyst projections. Total costs surged by 16% to 348.8 billion rupees, with raw material costs rising by 17%.

Maruti Suzuki's shares lost their intraday gains in Mumbai after the earnings announcement, trading 1.3% lower. The stock has fallen by almost 18% in the last quarter, outpacing the decline in the benchmark S&P BSE Sensex.

The subdued earnings by Maruti Suzuki, which holds a 40% market share in India, come after the company announced price increases for its vehicles from February 1st to mitigate rising input and operational costs.

Tata Motors, a rival automaker, recently announced price hikes of up to 3% across its passenger vehicle portfolio to offset increasing input costs and inflation.

Surging input costs, driven by the rupee's depreciation against the US dollar, have exacerbated challenges for Indian companies already facing a consumption slowdown that has affected sales of various sectors.

Maruti Suzuki cited adverse foreign exchange movements and higher sales promotion expenses as negative factors. Automobile deliveries in India have been impacted by a weak rural economy and low demand for entry-level cars.

The automaker, which played a significant role in India's small-car revolution in the 1980s, has faced slowing demand as buyers shift towards SUVs and compact SUVs.

During the quarter, Maruti Suzuki sold a total of 566,213 vehicles, including 99,220 units exported. Domestic sales accounted for 466,993 units, an 8.7% increase year-over-year.

The company is now aiming to establish a stronger foothold in the electric vehicle market, despite its late entry. It recently unveiled its first electric vehicle, the e VITARA, at an auto show in India and plans to launch five more EVs by 2030.