Rupee fall: Gains for domestic carmakers; margin pressure for luxury players – Express Mobility News

The depreciation of the rupee against the dollar comes as a mixed bag for the automotive sector, benefiting export-driven domestic manufacturers while adversely affecting luxury carmakers reliant on imports.

Domestic manufacturers such as Bajaj Auto and Maruti Suzuki are poised to capitalise on the rupee’s slide as their overseas sales, priced in dollars, yield bigger margins.

Bajaj Auto, the country’s largest exporter of two- and three-wheelers, recorded a robust 11% year-on-year (y-o-y) growth in exports, selling 1.21 million units between April and November. The company’s key markets include Latin America, Asean, and Africa, where demand remains strong, and transactions are predominantly conducted in dollars.

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Similarly, Maruti Suzuki, the country’s largest passenger vehicle (PV) exporter, reported an 18% y-o-y surge in exports during the same period, even as its domestic despatches dipped by nearly 3%. The company exports vehicles to regions, including Latin America, Africa, West Asia, and South East Asia.

The rupee’s decline also spells good news for auto component manufacturers, who derive a significant portion of their revenue from exports. The US alone accounts for 33% of India’s auto component exports, which grew by 9% y-o-y to $3.67 billion in the six months ended September, according to the Automotive Component Manufacturers Association. “Auto component exporters historically benefit during periods of sustained rupee depreciation, as it boosts their margins,” said an analyst at Icra.

However, the falling rupee presents challenges for import-dependent luxury carmakers like Mercedes-Benz, BMW, Audi, and Volvo. With 70-100% of their vehicle components being imported, these brands are reeling under cost pressures and have announced price hikes of 2-3%, effective January 1.

“BMW Group India’s strategic price adjustment, across the range of models, is a response to shifting market conditions, inflation, and increasing input costs,” a company spokesperson said.

This marks a cumulative price increase of up to 5% for luxury car brands over the past year. If manufacturers fail to pass on the cost burden to consumers, they risk eroding their margins further.

The rupee, which has depreciated by nearly 2% over the last two months, hit a record low of Rs 85.2 against the dollar on Tuesday.

While luxury carmakers grapple with rising costs, the depreciation positions indigenously manufactured vehicles and components as more competitive in global markets. “For companies reliant on imports of raw materials, the impact of forex movements is typically passed on to customers over time,” the Icra analyst said.

The contrasting fortunes of the automotive sector highlight the nuanced impact of currency fluctuations. While exporters ride the wave of a weaker rupee, the dependence on imports for luxury vehicle manufacturers underscores the challenges of a globalised supply chain. For now, domestic players with a strong export focus appear to have the upper hand.

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