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Informist, Tuesday, Oct. 29, 2024

MUMBAI – Retail sales of passenger vehicles of Maruti Suzuki India Ltd are likely to have grown 14% on year during the festival season--between the end of Shraddh period and Diwali--its management said Tuesday. The automaker expects to sell almost 300,000 units in the retail market during the period, which is expected to help bring down its passenger vehicle inventory with dealers to an ideal level of 30 days. 

"Retail sales in this festival period have been very good. They've increased by 14%. Our wholesale (sales) have actually not increased. It's gone down by about 4%. As a result, the inventory levels have come down sharply," Maruti Suzuki Chairman R.C. Bhargava said in a conference call held to discuss the company's Jul-Sept financial performance.  

When asked about the decline in wholesale numbers, Bhargava said the performance of the passenger vehicle industry should be determined by the retail numbers, not the wholesale numbers, and in the festival season retail sales have been much higher than the wholesales.

"We had a situation in the last two months where the industry as a whole has very large inventories available. Our dealers also had well over 30 days of inventory. We have been systematically planning production to cut output to suit the market requirement to bring down inventories. We have reduced wholesale dispatches so that inventories can come down," Bhargava said.

Maruti Suzuki's head of marketing and sales, Partho Banerjee, said, "Our inventory by the end of month (October) will be around 30 days. It will vary from segment to segment, but we will be comfortably placed. But maybe in the case of some small cars, we will have inventory of 40 to 45 days. But we expect to correct that in the third quarter." 

Passenger vehicle inventory with dealers had reached a historically high level of 80–85 days in September, due to weak demand during Ganesh Chaturthi and Onam. This weakness in demand was further exacerbated by the Shraddh period. In Jul-Sept, Maruti Suzuki's wholesale sales fell by 1.4% on year, as per company data. In comparison, its retail sales fell by 7.4% on year, according to data from the Federation of Automobile Dealers Associations.

India's largest passenger vehicle manufacturer has received over 400,000 bookings so far in October, and aims to deliver 200,000 vehicles by the end of the month. "The new enquiries and the bookings have been better than last year, not by very much, but better than last year. And, therefore, we look forward to a reasonable quarter (Oct-Dec) where we should continue with our growth, but that growth is not going to be very much different from between 3% and 4%," Bhargava said.

When asked about the demand after the festival season, Bhargava said, "The (passenger vehicle) industry is not very optimistic that there's going to be great upsurge in demand... The industry expectation is that this year's growth will be somewhere between 3-4%, and Maruti will be in line with the industry."

Responding to a question about the slowdown in passenger vehicle sales and when it is likely to end, Bhargava said the auto industry has had a difficult time this year but despite that, the company has managed to perform well. Maruti Suzuki is not worried about the slowdown in sales as it has experienced such situations before and has managed them well. However, the company doesn't know whether the current slowdown will last for a long or short time as it does not have enough data. 

For Maruti Suzuki, the bigger worry has been a decline in sales of passenger vehicles under INR 1 million. "The fact that the market under INR 1 million is not growing, in fact it is declining, that's a cause of some worry. Because unless that lower end of the market grows, there are going to be no feeders into the upper market," Bhargava said. In 2018-19, the under INR 1 million car market was 80% of the overall passenger vehicle market, but now the above INR 1 million car market is driving sales growth. The under-INR 1 million car sales have been impacted due to price increases, he said. 

In the popular sport utility vehicle segment, Maruti Suzuki currently has a 27% market share. Bhargava said the company has increased market share even as it entered the segment late, and despite aggressive new product launches by peers. In Jul-Sept, the company sold 180,535 utility vehicles, compared to 163,130 units in Apr-Jun.

On high discounts offered by car manufacturers to drive sales, Bhargava said, "Discounts are a function of the market condition and of what the company itself does in terms of scheduling its production to better suit the market requirements... Overall, I do not think that in the coming months, in the case of Maruti, our discount levels will be higher than what we've been giving so far because we have better aligned."

"The discounts in this quarter were naturally higher because inventories were higher. There was a lot of stock to be cleared. Now our stocks are down to much more reasonable levels. Yes, there are some cars where the stocks are still high, and they will continue to have discounts. But overall, I don't see that there would be any significant change or increase in the discounts," Bhargava said.

When asked about whether the company will be able to meet its exports target for 2024-25 (Apr-Mar), Bhargava said the company is on course to achieve its exports target of over 300,000 units despite the current situation in the Middle East, as there is demand from other markets. Further, in Apr-Sept, the company's capacity utilisation was at 90%. 

Tuesday, shares of Maruti Suzuki closed ended 3.8% lower at INR 11,046 on the National Stock Exchange after the company announced earnings for Jul-Sept. The automaker's net profit declined 17% on year to INR 30.69 billion on a revenue of INR 372.03 billion against INR 370.62 bln a year ago. End

Reported by Darshan Nakhwa and Ketan Barot

Edited by Deepshikha Bhardwaj

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