new delhi majority of auto companies and their investors are bracing for more pain as the industry heads into second earnings season of the financial year 20192020 initial indicators from leading brokerage houses suggest that severely low sales production cut across the board and inventory inertia are likely to breach the thresholds of revenue and operating profit marginsanalysts at motilal oswal said q2 fy20 is expected to be one of the worst quarters in a decade with pressure across segments as oems focused aggressively on inventory reductionebitda earnings before interest tax depreciation and amortization to contract for the fifth consecutive quarter by 380bps on a yearonyear basis to 95 per cent due to higher variable marketing expenses and operating deleverage as per a motilal report advt it also expects bajaj auto and tvs to deliver stable sequential margins but is of the view that maruti suzuki ashok leyland tata motors and eicher motors are most likely to be worst impacted by the slump in auto with margins dropping upto 750 bpsebitda margin to shrink by 310bp yoy fourth consecutive quarter of contractionvolumes 000 unitsebitda margins adj pat inr moems2qfy20yoy qoq 2qfy20yoy bpqoq bp2qfy20yoy qoq bajaj auto11741245915219030121965883hero motocorp1691207821341801008569122294tvs motor88618640787010152927674maruti suzuki338302160717403308500595408tata motors sa105449236226204206060na natata motors jlr135321387714035069315824tata motors consol712302201480441260ashok leyland2944326952570420795854675eicher royal enfield167207932505609047363949eicher vecv1139214725650300239nanaeicher consol25056090449220706agg ex jlr442620183953902104467539786projected figuressource motilal oswalmost of the companies have already slashed spending with many of them cutting jobs underscoring the severity rahul mishra principal at kearney said the choke full of inventory in the channel is spiking the holding cost for dealers and therefore their profitability is taking a big hitnot being economically viable under such circumstances lead to shutdowns and the ones who managed to sustain have got massive credit interest outstanding on account of receivables mishra told etauto pointing that if dealers profitability get impacted for a prolonged period of time it starts shrinking the margins of oemsbesides deep discounting will also erode the profitability at vehicle level for the first time in recent years the countrys largest carmaker maruti suzuki announced discounts and benefits of up to rs 1 lakh on its cars in september other carmakers like honda nissan hyundai and renault also offered hefty discounts during this period to liquidate stocks of bs iv vehicles advt read alsoslowdownhit auto firms headed for another disappointing quarteralltime high discounts and increased marketing expense fail to kill slowdown ravana higher discounts to clear bsiv inventory ahead of the deadline is also a risk to margins for the rest of the year in the absence of gst cuts analysts at jefferies said in a report despite the recent corporate tax cut bonanza from the government the new yorkheadquartered brokerage firm expects sharp cuts to fy20 earnings estimates of auto companieswithin the sector the pressure will be relatively acute for commercial vehicle players even if the cars and twowheeler volumes see some uptick during the rest of the festive season demand momentum for cv sector will continue to remain weak due to its higher dependence on general industrial