Outstanding operational performance, locally sourced and cheaper raw materials along with deferred investments has caused cash reserves of automobile companies to see a notable increase in the past year.
These cash reserves will allow the automakers to launch new models and enhance their R&D facilities while companies will have to pay special attention to new regulations with regard to emission, fuel efficiency and safety.
Increased demand saw Maruti Suzuki India Limited increase their cash reserves two-fold from INR 7,274.8 crores in 2009-10 to INR 17,824.8 crores in 2015-16. Tata Motors, who is sitting on top with the highest cash reserve with INR 19,163 crore for last fiscal, was once sitting with INR 25,053 crore in 2010/11.
Ashok Leyland, Bajaj Auto, TVS Motors also announced notable increase in cash reserves with Ashok Leyland noting cash reserves increase from INR 845.08 crores in 2009-10 to INR 3,485 crores in 2015-16. Bajaj Auto saw cash and reserves increase from INR 4,122.9 crores in 2009-10 to INR 10,372 crores in 2015-16 backed by rising sales.
Most of these companies are utilizing their cash reserves in adding new manufacturing plants. For eg, in 2010, Tata Motors Sanand plant came up in Gujarat; the new Mahindra plant came up in Chakan, Pune while in 2014 Hero MotoCorp set up a new plant in Neemrana, Rajasthan.
Higher competition among both two and four wheeler makers has also instigated companies to spend more on advertising, marketing and brand building while automakers are unlikely to utilize these cash reserves in the creation of Greenfield capabilities.
Automotive companies and their cash reserves