Financial Performance of Indian Automobile Companies

Companies across the globe aspire for higher profit margins which need to be sustainable in future, but only few are able to realize that. Let us have a look at the long term financial performance of automobile companies which are listed on Indian share market (BSE/NSE).


  • JLR – Jaguar & Land Rover (a fully owned international subsidiary of Tata Motors)
  • Eicher (Royal Enfield) 2009 – Formed Joint Venture with AB Volvo of Sweden; transferred commercial vehicle business to the JV
  • Eicher (Royal Enfield) 2015 – Figures for FY16 and FY17 are as per Indian Accounting Standard, from Dec’06 – Dec’14 are as per IGAAP
  • Data Source : (standalone/non-consolidated data)


Let us consider India’s largest private sector company (in terms of revenue) – Reliance Industries Ltd. (RIL) as a reference point.

Over the same period, RIL has made almost twice the net profit (value terms) as all of these companies put together. But then, quite a few automotive companies have achieved revenue and profit growth rate far higher than RIL and some have even better profitability. Thus their combined Market Capitalization is much higher than RIL.


Maruti has not only dethroned Tata Motors (non JLR) in terms of revenue but now is far ahead with its product onslaught. Mahindra too is closing on Tata. Once Mahindra (2006) was smaller than half the size of Tata!

Net Profit

Can also be viewed as the earnings available to shareholders once all of the company’s obligations have been satisfied (e.g. to government, to suppliers, employees, utilities, lenders etc). Share Markets tends to view net profit on a per share basis, popularly known as Earnings per Share (EPS) and its derivative PE ratio (Price to Earnings). In long run, Bajaj is making very consistent net profit (value terms) in comparison to peer group.

Net Profit Margin

This figure is indicator of profitability and is good for apple to apple comparison, particularly from investment perspective.  In long run, Eicher, Bajaj, Hero and Mahindra turn out to be more profitable than the largest Indian company (RIL) and favorite of Indian stock market since 90s.

Market Capitalization

Largely depends on net profit margin and guided by future growth expectation. But there are several other factors too and sometimes mere speculation. For example, Bajaj and Eicher with highest net margin, are more valuable than Hero, which though is bigger in terms of revenue. Tesla has not had made any money (profit) till date, still it is more valuable than Ford because investors feel that it will make (colossal) money in future, will it or won’t it, is left to the future. Right now Maruti Suzuki India Ltd (MSIL) is by far most valuable Automaker in India. Tata Motor’s high valuation is because of crown jewel – wholly owned international subsidiary Jaguar & Land Rover (JLR).


In long run they have been really good at delivering profitable performance YoY. Mahindra has most diversified automotive portfolio, from tractors to cars and have put their money behind other modes of transportation too, including aircrafts and boats. Diversified portfolio helps in mitigating risks emanating from the cyclical nature of few end markets. But buying one basket for every egg has its own share of disadvantage too. Every business line will be fighting for parent’s attention and resource, and group may lose its focus. Mahindra is #1 in tractor business but in all other segments it has to content with lower rung and sometimes bottom one too. Their 2 wheeler business is massive disappointment, adding red ink to P&L statement with reported loss of  ₹ 865 Crores (FY2016) and ₹ 692 Crores (FY2017), and virtually no sales now.


Maruti’s net profit margin could have been much higher, has it not been paying royalty to its parent Suzuki Motor Corporation Japan. Royalty payment is common practice among the MNC, for further reading, refer to the Business Standard article. Royalty payment being an expense on P&L statement, not only circumvent corporate tax liability but also lowers the dividend yield for shareholders at large.

 Tata Motors (non-JLR)

Tata Motor’s domestic business is perhaps the worst performer in terms of profitability. In over a decade, it’s the only company which has reported huge losses, twice. Tata Motor’s Chairman Mr. N. Chandrasekaran has expressed his concern in recent shareholder’s annual general meeting. He has also assured that turnaround of domestic business is in progress. However, high capital expenditure in developing new products in PV segment and upcoming BS VI up gradation in CV segment may keep cost high and profit elusive in near term. Profit from JLR is helping Tata motors to keep its head above water.

Commercial Vehicle Manufacturers

Though industry has few players, competition is intense and overall profitability is pretty low, even in long term. Ashok Leyland, Force Motors and Tata Motors having substantial revenue contribution coming from CV segment just corroborate this. By contrast, engine and allied technology providing companies like Cummins (supplies engines to Tata Motors CV division) and Greaves Cotton happens to be more profitable!

Differentiated 2-Wheeler Offerings is Real Money Spinner across the Automobile Industry!

  • Hero may be #1 in terms of volume and revenue but over the years Bajaj has consistently outperformed in terms of net profit (value) and net profit margin.
  • 80% of Eicher profit is contributed by Royal Enfield (RE), with newer, highly desirable and high margin product line, RE is fast catching up with volume players.
  • Poor profitability of TVS in long term is exception in the lot here.

In Indian market real profit is generated by differentiated 2-wheeler product line. Scion at Bajaj (Mr. Rajiv Bajaj & Mr. Sanjiv Bajaj) and Eicher (Mr. Siddharth Lal) have changed the course of their respective company by getting rid of few legacy business and products and bringing in new thinking and their ability to turn dream into reality. Whereas Bajaj Pulsar brought performance, excitement with practicality in reach of common man, Royal Enfield over the past decade has bolstered its cult following with the owners and onlookers alike. Below table shows how successful products in higher price band offers higher overall margin.

Mahindra has burnt fingers in 2W-mass market segment, and virtually no sales now. Mahindra 2W business foray began with the acquisition of Kinetic Motor’s assets (2008), from Pune-based Firodia family. Kinetic motors once had popular two-stroke scooter offering in India, till they had partnership (1984-1998) with Honda, known as Kinetic Honda. Post partnership breakup, Kinetic Motors on their own made four-stroke scooters and motorcycles, which didn’t do well, and later resulted in promoter’s partial exit from the company. Mahindra infused capital over time and introduced new product line along with rebadged Kinetic products. However, none of the product was competitive enough to bring in the expected sales volume. Product(s) having right attribute(s), that meets or exceeds the need(s) of potential consumer, positioned at right price helps to win customer, every product name ending in letter ‘O’, doesn’t!

Mahindra now want to do what Bajaj & Royal Enfield did – be a Niche or Premium 2W Player. Mahindra is back to drawing board, and has started acquiring European brands like Peugeot Motorcycles, BSA and Java.

After years of low level of profit, TVS too wants to expand profit margin. Joint venture initiative with BMW Motorrad and high performance products like Apache RR 310 seems to be a step in that direction.

(The article is written by Rohan Rishi. You can connect with him at

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