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A cost analysis of automobile sector

AUTOMOBILE INDUSTRY IN INDIA

Automobile industry is one of the most building blocks of the worlds most influen
tial economies such as US and Japan. Today , the industry is among the most vibr
ant , modern,and growing markets in the world. In 2009 India emerged as Asias 4th
largest exporter of automobiles. Indian automobile industry is ranked 10th glob
ally. (2nd in two-wheelers,4th in four wheelers). The auto industry accounts for
about 5.2% of India s GDP

TATA MOTORS Ltd.

COST ELEMENTS
rawmaterials employeecost Prime cost powerandfuel manufacturing factory cost selling
dadminstration miscellaneousexpense Total expense 2007 19,879.56 1,367.83 21,247.3
9 327.41 872.95 22,447.75 1505.23 1051.49 25,004.47 2008 20,891.33 10,554.57 31,
445.90 325.19 904.95 32,676.04 2197.49 964.78 35,838.31 2009 18,801.37 1,551.39
20,352.76 304.94 866.65 21,524.35 1652.31 1438.89 24,615.55

PERCENTAGE CHANGE IN COST ELEMENTS 2007-08 5.08 671.6 47.93 -0.67 3.6 45.5 45.9
-8.246 43.3 2008-09 -10.0 -85.3 -35.2 -6.22 -4.23 -34.1 -24.8 49.14 -31.315
raw materials employee cost Prime cost power and fuel manufacturing factory cost
selling and administration miscellaneous expense Total expense

Vertical analysis of cost elements with respect to Total cost(%)


2007 Prime cost factory cost selling and administration 84.9743666 89.7749482 6.
01984365
2008 87.744 91.176 6.1317
2009 82.683 87.442 6.7125
miscellaneous expense4.20520811
2.692
5.8455

CONTRIBUTIONOFCOSTELEMENTSONTOTALCOST

ANALYSIS
Net sales is highest in 2008 ,which amounts to 28768 Cr. The cost incurred in 20
08 is found to be highest compared to other years, which amounts to 35838.8cr an
d Total income is 29214Cr.

INTERPRETATION
In year 2007-08 Tata motors were marked with two events.
unveiling of Tata Nano.
acquisition of Jaguar and Land Rover.
The Company recorded its highest ever sal
e of 5,85,649 vehicles and grew its turnover to Rs. 33,094 Crs. to remain as Ind
ias largest automobile company by revenue.

RISE IN EMPLOYEE COST IN 2007-08


Due to companies expansion and growth plans, em
ployee recruitment and training was carried out extensively . During the year, t
he Company entered into a three year wage settlement with its unions at Jamshedp
ur and Pune, Passenger Car Business.

Maruti - Suzuki Ind . ltd

Cost Sheet of Maruti Suzuki of Ind Ltd


Particulars 2007 2008 2009 Raw Materials Materials consumed Power & Fuel Cost Em
ployee Cost Other Manufacturing Expenses Factory cost Administrative Expenses Mi
scellaneous Expenses Cost of production Selling& Distribution Expenses Cost of s
ales 10,863.00 10,863.00 97.4 288.4 392.4 11,641.20 274.5 239.44 12,155.14 194.4
6 12,349.74 14806.4 2165.66 13,958.30 13,958.30 147.3 356.2 523.3 14,985.10 170.
6 287.62 15,443.32 331.08 15,774.40 18066.8 15,983.20 15,983.20 193.6 471.1 716.
1 17,364.00 150.2 303.44 17,817.64 578.56 18,396.20 20729.4 2564.16
Sales PROFIT
2287.28

Comparison of items on cost sheet

Expenditure as a percentage of total expenses


Expenditure 2007 %of Cost of 2008 sales 87.96 0.79 2.34 3.18 13,958.30 147.3 356
.2 523.3 %of Cost of sales2009 Raw Materials Power & Fuel Cost Employee Cost 10,
863.00 97.4 288.4 88.49 0.93 2.26 3.32 15,983.20 193.6 471.1 716.1
Other 392.4 Manufacturing Expenses Selling and 483.26 Admin Expenses Miscellaneo
us Expenses Total Expenses 239.44 12,349.60
3.91
521.48
3.31
751.06
1.94 100.00
287.62 15,774.40
1.82 100.00
303.44 18,396.20

Cost of Sales for the year 2009

Material consumed formed a major part of cost of sales(87%) Manufacturing expens


es formed 4.83% of cost of sales Selling and administrartive expenses fomed 3.92
% and 2.07% of the cost of sales.

Expenses as % of cost of sales for the year 2008


Material consumed formed a major part of cost of sales amounting to 87.8% Manufact
uring expenses contributed 4.32% towards cost of sales. Selling expenses and admi
nistrative expenses contributed 3.6% and 2.10% respectively towards cost of sale
s.

Interpretation
The operating income of the company showed an increasing trend over the years. It
increased from Rs 11046.30 in 2005 to Rs 20729.40 in the year 2009. The cost of s
ales increased from Rs 9476 to Rs 18825.70 from the year 2005 to 2009. The operat
ing income increased to 21.23% from the year 2005 to 2009. The net profit increas
ed to 39.3% in the year 2005-06, 22.39% in the year 2006-07, 10.84% in the year
2007-08 but it decreased to 29.59% in the year 2008-09

Ashok Leyland

Cost sheet
Particulars Raw Materials Materials consumed Power & Fuel Cost Employee Cost Oth
er Manufacturing Expenses Factory cost Administrative Expenses Cost of productio
n Selling& Distribution Expenses Cost of sales Sales Profit 2007 5,570.18 5,570.
18 45.44 480.7 41.7 6,138.02 413.1 6,551.12 170.7 6,721.82 7,358.88 637.06 % cha
nge 6.87 6.87 -0.35 28.18 37.84 8.70 -3.23 7.94 14.02 8.10 8.34 10.87 2008 5,952
.86 5,952.86 45.28 616.17 57.48 6,671.79 399.76 7,071.55 194.63 7,266.18 7,972.5
2 706.34 % change -23.49 -23.49 -15.15 -8.10 -12.49 -21.92 -83.76 -25.42 62.65 23.06 -24.09 -34.76 2009 4,554.36 4,554.36 38.42 566.26 50.3 5,209.34 64.91 5,27
4.25 316.57 5,590.82 6,051.64 460.82

Expenses as % of Cost of Sales


Particulars
2007
As % of 2008 cost of sales 82 . 87 0 . 68 7 . 15 0 . 62 6 . 15 2 . 54 100 As % of
2009 cost of sales 4 , 554 . 36 38 . 42 566 . 26 50 . 3 64 . 91 316 . 57 5 , 59
0 . 82 As % of cost of sales 81 . 46 0 . 69 10 . 13 0 . 90 1 . 16 5 . 66 100
Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Admin
istrative
5 , 570 . 18 45 . 44 480 . 7 41 . 7
5 , 952 . 86 81 . 93 45 . 28 616 . 17 57 . 48 399 . 76 194 . 63 0 . 62 8 . 48 0
. 79 5 . 50 2 . 68
Expenses 413 . 1 170 . 7 6 , 721 . 82
Selling & Distribution Expenses Cost of sales
7 , 266 . 18 100

HINDUSTHAN MOTORS

COST SHEET
PARTICULERS AMOUNT 07 AMOUNT 08 AMOUNT 09
SALES RAW MATERIALS PRIME COST + FACTORY O/H POWER & FUEL EMPLOYEE COST MANUFACT
URING EXP
TOTAL FACTORY COST ADMINISTRATIVE & SELLING COST MISCELLANEOUS EXPENSES COST OF
SALES
666 . 51 504.08 504 . 08 16.15 69.14 2.4
87.69 84.48 21.5 697 . 75
704 . 66 502.93 502 . 93 13.65 86.11 8.17
107.93 94.33 21.72 726 . 91
626 . 55 469.96 469 . 96 12.92 75.97 4.93
93.82 84.48 26.85 675 . 11

% CHANGES IN COST
PARTICULERS
POWER & FUEL EMPLOYEE COST MANUFACTURING EXP
2007
16.15 69.14 2 .4
% CHANGE
-15.47 24.54 240.41
2008
13.65 86.11 8.17
%CHANGE 2009
-5.34 -11.77 -39.65 12.92 75.97 4.93
TOTAL FACTORY COST
87.69
23.08
107.93
-13.07
93.82
ADMINISTRATIVE & SELLING COST MISCELLANEOUS EXPENSES
84.48
11.65
94.33
-10.44
84.48
21.5
1.02
21.72
23.61
26.85

Mahindra & Mahindra

Cost Sheet 2007-2009


Mar 07 RawMaterials Prime Cost Power&FuelCost EmployeeCost OtherManufacturing Expen
Work Cost Cost Of Production Selling expenses 6,937.16 6,937.16 65.19 666.15 68
.8
7,737.30
Mar 08 7,963.82 7,963.82 91.33 853.65 73.35
8,982.15
Mar 09 9,208.71 9,208.71 98.69 1,024.61 75.36
10,407.37
Adminstrative expenses 466.22
8 , 203 . 52 635.1 8,838.62
1,136.23
561.66 9 , 543 . 81 804.51 10,348.32
1,157.65
575.34
10 , 982 . 71
937.56 11,920.27
1,092.25
Cost of sales
OperatingProfit Operating income
10,458.92
12,035.44
13,339.54

Comparison of Various Costs and Incomes


RawMaterials Prime Cost Power&FuelCost EmployeeCost OtherManufacturing Expenses Work
st % Cng. Frm. 2007 14.80 14.80 40.10 28.15 6.61 16.09 % Cng. Frm. 2008 15.63
% Cng. Frm. Base year 2007
15.63 8.06 20.03 2.74
15.87
32.74 32.74 51.39 53.81 9.53
34.51
Administrative expenses 20.47
Cost of Production 16.34
Selling expenses 26.67 17.08 1.89 15.07
Cost of sales
OperatingProfit Operating income
2.44 15.08 16.54 15.19 -5.65 10.84
23.41 33.88 47.62 34.87 -3.87 27.54

Contribution of Expenses to Cost of Sales


Expenses RawMaterials Power&FuelCost EmployeeCost OtherManufacturing Expenses 2007 7
9 0.74 7.54 0.78 2008 76.96 0.88 8.25 0.71 5.43 7.77 2009 77.25 0.83 8.60 0.63 4
.83 7.87 100.00
Adminstrative expenses 5.27 Selling expenses 7.19
Cost of sales
100.00
100.00

v ThenetprofitofTatamotorswashighestintheyear2008i.e.2028.92 crore,butinth
6.55crore.
Conclusion
v
v Theprofitofthecompanydecreasedby49%intheyear2009.
ewhichwas lowerthanthatofTatamotors

ThenetprofitofMarutiS

v Intheyear2009thenetprofitofthecompanydecreasedby29.58%buton comparingthe
fitofMarutiSuzukiwas 11.9%higher.

v
v HindustanMotorsistheworstperformingcompanyshowinganegative growthintheyear
.84intheyear2009.
v OnthebasisofpasrecordsTataMotorsisthebestperformingcompanyin India.
v