In the last financial year, the operating margin of two-wheeler makers in India was almost twice as that of the car makers. The car makers have been lagging behind in terms of profits for all of the last decade, indicating that selling two wheelers in India is way more profitable than selling hatchbacks and SUVs, even though four-wheelers are expensive by manifold.
An analysis conducted by Business-Standard based on audited financial results of listed and unlisted automakers reveal some interesting facts and figures. For this purpose, the publication has selected 7 car makers namely Maruti Suzuki, Tata Motors, Mahindra & Mahindra, Hyundai Motors India, Honda Cars India, Toyota Kirloskar and Ford India. The other OEMs were excluded since they don’t have data for the last 10 years.
The two wheeler makers included in the analysis are Hero Motocorp, Bajaj Auto, Honda Motorcycle & Scooter India, TVS Motor, and Eicher Motors (Royal Enfield). In 2014-15 financial year, the two wheeler makers included in the analysis posted a combined revenue and net profit of INR 81,500 crore and INR 6,900 crore respectively. In comparison, the aforementioned car makers posted a combined revenue and net profit of INR 1.95 lakh crore and INR 3,440 respectively. As you can see, two wheeler makers clearly enjoy better profit margins.
The two wheeler industry also managed to remain almost debt-free and several brands have copious amount of fluid cash in hand. In 2014-15, the aforementioned two wheeler companies had a combined debt of INR 1,082 crore which less than 5% of their net worth. On the other hand, the four wheeler makers included in this analysis have a combined debt of INR 40,300 crore which is around 60% of their net worth! Maruti Suzuki is the only brand to have remained debt-free over the past decade. The company had a cash reserve of INR 12,600 crore as of March 2016.
Via – Business-Standard.com