May 13 (Reuters) - India's Tata Motors flagged near-term cost pressures from the Iran war, warning that the Middle East conflict was fuelling commodity inflation and disrupting some exports, even as the automaker reported a nearly 70% rise in fourth-quarter profit on Wednesday.
Indian automakers' recovery since September's tax cuts to boost consumption is losing momentum as rising steel, aluminium and freight costs squeeze margins, while demand sensitivity limits the companies' scope to hike prices.
Cost pressures had intensified in recent months, with commodity inflation picking up and supply chains facing disruptions, said Girish Wagh, managing director and chief executive of Tata Motors.
"This external event (Iran war) has led to multiple headwinds ... the first is serious commodity inflation," Wagh said on a post-earnings call.
The conflict has also hit overseas shipments. "The Middle East crisis has impacted our exports to the Middle East and partly to the North African market," Wagh said, though he added the company had managed to maintain growth in international volumes.
Tata Motors is closely monitoring diesel prices, a key cost component for fleet operators, Wagh said, adding that any rise could affect demand.
The company has taken steps to cushion the impact, including a 1.5% price hike for its commercial vehicles from April.
Despite the headwinds, underlying demand in the domestic market remained strong, which helped the automaker post a 26% surge in its domestic sales in the fourth quarter, compared with a year earlier.
Overall revenue also jumped 22.3% to 244.52 billion rupees ($2.56 billion).
($1 = 95.6093 Indian rupees)
Reporting by Kashish Tandon in Bengaluru; Editing by Harikrishnan Nair and Maju Samuel
Source: Reuters