Traditionally the most prosperous period for the auto industry, October-December, or the third quarter of the financial year, wouldn?t have been as lucky this year for Maruti Suzuki India Ltd, the country?s largest passenger carmaker.

An Angel Broking preview of the company?s performance in the third quarter say Maruti Suzuki will report a 54.1% dip in Q3 net profit to Rs 214 crore from Rs 467.04 crore in the same last fiscal. The company?s net sales are also estimated to decline by 7.8% in the third quarter of 2008-09 to Rs 4,292 crore from 4,654 crore a year ago.

These come on the backdrop of 14% dip in the company?s sales in the third quarter at 1,73,494 units versus 2,01,629 units in Q3, ?07-08.

?Though raw material costs, which account for almost 70% of the total cost for auto manufacturers, have seen some kind of softening, margins would bounce back with a lag effect post-reduction in high-cost inventory,? says Vaishali Jajoo, senior research analyst, Angel Broking.

?Realisation will certainly come down in the third quarter as companies have been undertaking a lot of promotional activities, including huge discounts. Moreover, the volumes have been low during this period, mainly because of high interest rates and unavailability of finance. Consequently, overall net-to-net margins will decline in the third quarter,? says a Mumbai-based analyst.

In fact, so large was the quantum of discount that some Maruti cars were available at prices lower than what they were in December 2007. For instance, Maruti Alto Lxi that cost Rs 2,99,270 (on-road, Delhi) in December 2007 was available at Rs 2,77,405 in December 2008, a saving of Rs 21,865. Even Wagon R Lxi, which earlier had a price tag of Rs 3,59,162 was available at 3,23,406, less by Rs 35,756.

Even the last two quarters of 2008-09 were tough for Maruti, as the company was selling higher numbers of its royalty paying models. Consequently, there was an increase in its other expenditures and this had further squeezed the company?s margins.

In the first quarter (April-June), the company registered a dip of 6.8% in net profit at Rs 465.85 crore against Rs 499.60 crore in the first quarter of 2007-08, its net sales went up by 20.9% at Rs 4,731 crore in Q1 2008-09 vis-?-vis 3,913,67 crore in Q1 2007-08.

Even in the second quarter (July-September), its net profit fell by 36.5% at Rs 296.12 crore against Rs 466.5 crore on a decline of 2.53% in domestic sales at 1,71,706 units from 1,76,154 units.. The company?s net sales during the quarter, however, went up by 6.11% at 4,806.26 crore against Rs 4,529.7 crore in the second quarter of 2007-08.

There is an overall dip in demand as customer sentiments continued to be low from the beginning of this fiscal. Volumes in the auto sector, which registered a growth of 12.1% y-o-y in the first half of 2009, fell 9.3% y-o-y (including exports) in October 2008 and further to 10.4% in November 2008, dragging the overall industry sales growth to 5.8% y-o-y to 7.7 million units. Consequently, the Auto Index registered 33.5% decline during the third quarter of 2009 vis-?-vis the 33.3% decline in the Sensex.