Mercedes Benz India's profits remained flat at Rs 311 crore during the financial year 2018-19, hit by subdued volume growth, rise in expenses and higher tax outflow. The Indian unit of German luxury car manufacturer had posted a net profit of Rs 306 crore in FY18, according to financial documents sourced from the ministry of corporate affairs.
During the fiscal, the company’s volumes fell 8.4% year-on-year (y-o-y) to 14,867 units, primarily pulled down by sales in last quarter (January-March), which was down by 14.7% y-o-y to 3,885 units. Volumes were impacted largely due to lack of optimum credit facility and rising costs of the vehicles on account of high taxes and increase in import duty on parts.
The profits of Mercedes Benz, the largest luxury car manufacturer in India by volumes, remained flat despite over Rs 200 crore increase in revenue and about Rs 400 crore decline in other expenses, compared to FY18. However, higher raw material costs took a toll on the company’s financials. While total revenue from operations in FY19 stood at Rs 6,314.3 crore against Rs 6,106.9 crore in the previous fiscal, other expenses declined to Rs 521.4 crore in 2018-19. Cost of materials consumed in FY19 grew by a sharp 35% to Rs 5,037.9 crore.
The company has undertaken several cost reduction initiatives as part of its efforts to maximise profits. “Efforts have always been taken to focus on reduction on costs in all the possible areas. Different projects were undertaken in specific areas and implemented during the year to achieve more profitable growth and sustainable environment,” Mercedes Benz India said in its financial statement for FY19, without elaborating.
While the overall passenger vehicle sales has been under pressure since the past one year on account of higher prices and costlier finance, the luxury segment has been hit more as higher taxes and poor consumer sentiment impacted volume growth. To be sure, even as industry sales declined by a few percentage points in FY19, volumes slipped by over 25% y-o-y during the first half of the calender year 2019.
Experts and industry executives believe the Indian luxury car market is staring at a double-digit decline in 2019, in line with the mass market passenger vehicle segment. The share of luxury cars in India has been less than 2% of the overall passenger vehicle market in the last three-four years and with average sales of around 35,000-40,000 units.