Most Indian vehicle makers to post lower Q1

By Rina Chandran

MUMBAI (Reuters) - India's top vehicle makers are expected to post mostly lower quarterly net profits, with margins remaining under pressure for the rest of the year due to high inflation and rising interest rates.

Leading motorbike maker Hero Honda Motors Ltd and top utility vehicle and tractor maker Mahindra & Mahindra are forecast to post gains on modest sales increases and a product mix that favours high-end vehicles with healthier

margins.

But the rest, including No. 1 vehicle maker Tata Motors, are set to post declines, analysts said.

"Concerns over higher input costs, volatility in foreign currency exchange rates and higher interest rates pose sizeable risks," said Amit Kasat at Motilal Oswal Securities.

Vehicle makers in Asia's third-largest economy have seen demand for motorbikes, cars and trucks soar in recent years on the back of higher incomes and an economy that has grown at an average rate of 8.75 percent in the last four years.

But higher costs of raw materials such as steel, and rising interest rates aimed at checking inflation hovering at 13-year highs, have bumped up vehicle loan rates by 200-300 basis points and depressed demand.

A fuel price hike in June of 10 percent, the biggest increase this decade, has further crimped consumer spending and delayed vehicle purchases.