India's top-selling car maker Maruti Suzuki India on Thursday missed its quarterly earnings estimate owing to a jump in expenses caused by a new nationwide tax rolled out earlier this month. Net profit for the three months to June 30 rose to 15.56 billion rupee ($242.66 million), up from 14.91 billion rupees in the same period a year ago, the company said.
A Bloomberg survey of analysts had forecast the Gurgaon-based company to increase its earnings to 17.05 billion rupees. "During the quarter there was a one-off impact of compensation given to dealers for the tax loss incurred on vehicles in the stock at the time of transitioning to the (Goods and Services Tax)," the company said in its statement.
Net sales rose 16.7 percent to 204.60 billion rupees and the company sold a total of 394,571 vehicles during the quarter, driven by an increase in demand for its Baleno hatchback and Vitara Brezza utility vehicle. Post GST, most passenger vehicles are taxed at the highest slab of 28 percent. Luxury cars and hybrids face an additional levy of 15 percent. Japan's Suzuki Motor has a 56.2 percent stake in Maruti. About three million cars were sold in India last year, a number that is expected to hit seven million by 2022, making it one of the fastest growing markets globally, said consulting firm PwC.
In the past year India's auto sector has been hit by a slew of unexpected policies that impacted demand including a ban on large diesel vehicles, new, and more, stringent emission norms and the government's shock move last November to pull nearly 90 percent of high-denomination currency from circulation. The new national tax which aims to transform India's $2 trillion economy into a single market has been the latest challenge for business as companies struggle to adjust.
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