Instability in foreign exchange rates has adversely affected most of the big firms. Tata Motors, which is the country’s third largest passenger-car maker and largest vehicle manufacturer, saw its net profit sinking for the quarter ended June30, 2008 by 30.13 percent as compared to the same period last fiscal, due to fluctuation in forex rates, inflationary pressures and a steep increase in input costs.

During the present quarter, the company reported a net profit of Rs 326.11 crore, while during the year-ago quarter; it had the net profit of Rs 466.76 crore.

“The pressure from input price increase has become enormous. The year will be the most challenging one for the auto industry. We have not shied away from price increases earlier and the process will continue,” reported Mr Ravi Kant, the Managing Director of the company.

The notional foreign exchange loss made by the company came up to Rs 199.88 crore, as compared to a gain of Rs 205 crore in the corresponding quarter last year. The figures clearly reflect the impact of heavy fluctuation on the long-term funds raised through issue of foreign currency convertible instruments.

The company also saw a sharp increase in its consumption of raw materials and components from Rs 3,994 crore in the year ago period to Rs 5,025 crore this year. This led to a further pressure on the margins of the company.

Though the company saw a flat sales volume for the passenger cars and utility vehicles at about 52,450, yet the commercial vehicles sale increased to 71,409 (61,633) during the quarter.

Its total sales volume grew by 3.9 percent to cross the 1.3 lakh mark. On the other hand, the company’s exports fell from 13,889 to 9220 vehicles during the quarter.

Mr Kant expressed that the current fiscal will be tough and challenging for the entire automobile industry with input costs rising and interest rates hardening, and not merely for Tata Motors.