REFILE-PREVIEW-Most Indian vehicle makers to post lower Q1

* What: Fiscal Q1 results from India's top vehicle makers

* When: From Thursday, July 10

* High steel prices hit margins; rising rates, fuel slow
sales

* Top bike maker, leading utility vehicle maker to post
gains
(Refiles to fix 'due to' in first paragraph, from 'to due')

By Rina Chandran

MUMBAI, July 9 (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 (HROH.BO: Quote, Profile, Research) and
top utility vehicle and tractor maker Mahindra & Mahindra
(MAHM.BO: Quote, Profile, Research) 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
(TAMO.BO: Quote, Profile, Research), 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.

(For a POLL on Q1 results, click [ID:nBOM325628])

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.

"As most suppliers' contracts are renewed in the first
quarter, we estimate operating margins to continue to be under
pressure," said Vaishali Jajoo at Angel Broking.

NANO EFFECT

Sales of small cars, motorbikes, three-wheeled motorised
rickshaws and light trucks rose slightly in the June quarter,
helped by an excise duty cut in in the federal budget at
end-February.

Vehicle makers have also raised prices by up to 3.5
percent, although that has been partly offset by an increase
in excise rates for premium vehicles and SUVs.

Still, a weaker rupee, which fell by nearly 7 percent
against the dollar in the June quarter, is helping boost
earnings from exports. New launches of bikes and cars, and
stricter emissions and safety rules are also expected to boost
longer-term demand.

Passenger vehicle sales, forecast to hit more than 2
million units a year by 2010, grew 12 percent to 1.55 million
units in 2007/08. Sales grew by a third the previous year.

The sector is expected to receive a boost from the launch
of Tata's Nano, the world's cheapest car, later this year.

The Nano, which will be priced at above 100,000 rupees
($2,300), is likely to grab share from top car maker Maruti
Suzuki (MRTI.BO: Quote, Profile, Research), and shift some motorbike users to cars.

Tata Motors, which recently completed the $2.3 billion
acquisition of Ford Motor Co's (F.N: Quote, Profile, Research) Jaguar and Land Rover
brands, is forecast to post a 31 percent decline in net profit
to 3.21 billion rupees ($74 million) on account of higher
interest charges and depreciation.

The outlook for commercial vehicle sales, which grew 4
percent in 2007/08, down from a 33 percent expansion in the
previous year, remains bleak because of high interest rates and
fuel prices.

Sales of motorbikes, which fell 8 percent in 2007/08 from
an 11 percent growth, may tick up on new launches.

Hero Honda, in which Japan's Honda Motor (7267.T: Quote, Profile, Research) controls
26 percent, is forecast to post a 35 percent rise in net profit
to 2.56 billion rupees, helped by sales of more premium bikes
and benefits from a new plant in northern India.

The auto index fell 21 percent in the June
quarter to its lowest level in more than two-and-a-half years,
faring worse than the benchmark BSE 30-share index
which fell 14 percent.
($1=43.3 rupees)
(Editing by Ranjit Gangadharan and Lincoln Feast)