Key highlights:

  • GST transition led to inventory destocking by dealers and increase in discounts
  • This resulted in a negative impact on revenue and margin performance
  • Most automobile companies were also affected by the higher input prices

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The automobile sector is expected to see a weak earnings performance in the second quarter of FY18. This is expected due to the transition to the new goods and service tax (GST) regime.

The GST transition led to inventory destocking by dealers and increase in discounts that resulted in a negative impact on revenue and margin performance, said analysts Raghunandhan N L and Bibhishan Jagtap in an Emkay Research report.

They further say that most automobile companies were also affected by the higher input prices due to their inability to take price hikes.

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