PREVIEW-Indian vehicle makers to post mostly lower profits

* What: Fiscal Q4 results from India's top vehicle makers

* When: From Thursday, April 24

* High commodity prices and interest rates hit margins; top
bike maker and car maker to post gains on more sales

By Rina Chandran

MUMBAI, April 22 (Reuters) - India's top vehicle makers are
set to post mostly lower quarterly net profits as high
commodity prices and interest rates weighed on margins and
slowed sales in Asia's third-largest economy.

But greater economies of scale as production facilities
expand and a cut in the excise duty on small cars, motorbikes
and buses will offset pressure in the coming quarters, analysts
said.

Top car maker Maruti Suzuki India (MRTI.BO: Quote, Profile, Research, Stock Buzz), No. 1
motorbike maker Hero Honda Motors (HROH.BO: Quote, Profile, Research, Stock Buzz) and leading utility
vehicle maker Mahindra & Mahindra (MAHM.BO: Quote, Profile, Research, Stock Buzz) are forecast to
report gains, helped by modest sales growth and cost
efficiencies.

But other vehicle makers, including top truck maker Tata
Motors (TAMO.BO: Quote, Profile, Research, Stock Buzz), are set to post declines as higher costs
bite.

Asian steel makers, passing on their own higher costs, have
asked automakers and other users to accept price hikes of 20-40
percent or more in recent months, while prices for rubber, oil
and other raw materials have also risen sharply.

"Factors such as increasing input costs and greater
volatility in foreign currency exchange rates, coupled with
lack of traction in volumes have been areas of concern," said
Amit Kasat, auto analyst at brokerage Motilal Oswal.

"(But) the worst phase of the volume decline and stagnation
in profitability has been negotiated. The benefits accruing
from productivity improvement and cost reduction would continue
to partially offset the pressures from rising input prices."

The Indian economy has grown at an average rate of 8.75
percent in the last four years, but is expected to slow to 8.1
percent in the year to March 2009, a Reuters poll showed.

Firmer interest rates, designed to check rising inflation,
have bumped up vehicle loan rates by 200-300 basis points, and
depressed demand for motorbikes and heavy trucks in particular.

It has also eased the pace of manufacturing, forcing
vehicle makers to cut inventory levels and adjust production.

But a cut in the excise duty in February on small cars and
buses to 12 percent from 16 percent, and on bikes and scooters
to 16 percent from 24 percent, will boost demand.

New model launches, particularly of passenger vehicles, and
new legislations on emissions and safety will also encourage
demand for trucks and buses in the long-term, analysts say.

For complete poll, see [ID:nBOM179393]

MARUTI GAINS

Total car sales in India in the year ended March rose 11
percent from a year earlier to 1.2 million. Passenger vehicle
sales are widely forecast to top 2 million units by 2010.

Maruti Suzuki, majority owned by Suzuki Motor Corp
(7269.T: Quote, Profile, Research, Stock Buzz), is forecast to post a 3 percent gain in net profit to
4.6 billion rupees ($115 million), helped by sales of more
premium cars like the new DZire sedan.

Competition for Maruti will come from Nano, a car from Tata
Motors priced at about $2,500 and scheduled for launch later
this year. Bike maker Bajaj Auto (BJAT.BO: Quote, Profile, Research, Stock Buzz) is also building a
$3,000 car with Renault (RENA.PA: Quote, Profile, Research, Stock Buzz) and Nissan Motor (7201.T: Quote, Profile, Research, Stock Buzz).

Tata Motors, which recently agreed to buy Ford Motor Co's
(F.N: Quote, Profile, Research, Stock Buzz) Jaguar and Land Rover brands, is forecast to post a 6.5
percent decline in profit to 5.4 billion rupees on the back of
sluggish sales of high-margin medium and heavy trucks.

Commercial vehicle sales edged up 4 percent in 2007/08, on
the back of light trucks like the Tata Ace, slowing from an
average growth of more than a fifth in the previous three
years.

The segment is dominated by Tata and Ashok Leyland Ltd
(ASOK.BO: Quote, Profile, Research, Stock Buzz), which has ventures with Nissan Motor.

New launches are planned by a several producers including a
venture of Mahindra and Navistar International NAVZ.PK; Volvo
(VOLVb.ST: Quote, Profile, Research, Stock Buzz) with Eicher Motors (EICH.BO: Quote, Profile, Research, Stock Buzz), and Daimler (DAIGn.DE: Quote, Profile, Research, Stock Buzz)
with the Hero Group.

The auto index fell 20 percent in the March
quarter, compared to a 23 percent decline of the key index
.BSESN.
($1=39.9 rupees)
(Editing by Ranjit Gangadharan and Lincoln Feast)