According to an analyst with a foreign brokerage, who did not want to be identified citing company policy, the likely candidates are Tata Motors Ltd, TVS Motor Co. Ltd and Ashok Leyland Ltd. A fund manager with a private sector mutual fund concurs.

It is no secret that Tata Motors’ medium and heavy commercial vehicles are much more profitable than its other products. In the last two months, sales of medium and heavy commercial vehicles have fallen by 50% and 60%, respectively, indicating that the country’s largest firm could be the closest to reporting losses. In the September quarter, when sales volumes were much better, the company had managed a pre-tax profit margin of a mere 3% of sales. This excludes other income and is before accounting for the impact of foreign currency translation losses. This also doesn’t take into account the high leverage of Tata Motors at the consolidated level and the fact that Jaguar-Land Rover’s sales are expected to be much worse and could drag down overall performance of the company.

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TVS Motor currently has the lowest pre-tax margin of 1.25%, and if volumes continue to decline for a few months, it would be a ripe candidate for reporting losses. The decline in its sales haven’t been as bad so far—in November, sales fell by 12.7%. So, the company may continue reporting profit for a slightly longer time frame.

Ashok Leyland reported a pre-tax margin of 4.2% last quarter, but given the rate at which commercial vehicle sales are declining and are expected to decline in the next few months, it may report losses in a couple of quarters’ time, says the fund manager. It has curtailed its ambitious capital expenditure plan, but based on what it has already spent, its interest cost and depreciation charges are expected to rise. This is happening at a time when a drop in volumes would lead to lesser economies of scale and a drop in profitability.

It’s not that the other auto manufacturers will go unscathed. Given their superior profitability margins (see table), they may not go into losses in the near future, but most of them are set to report huge drops in profit. The only exception is Hero Honda Ltd, which has managed to maintain volumes by gaining market share. It is enjoying higher profitability this year compared with the previous year. Of course, even its volumes may drop as the slowdown gets worse, but it is still expected to be the best placed in the industry. Its pre-tax margins of 12.4% last quarter were the highest in the industry.

This is the reason Hero Honda is the only auto stock to enjoy a double-digit price-earnings multiple. Other auto stocks have all fallen sharply, but there may be room for further correction if there are no signs of a recovery in the next few months.