More Stories

Informist, Friday, Apr. 25, 2025

By Anand JC

NEW DELHI - Automobile industry veteran and Maruti Suzuki India Ltd.'s Chairman R.C. Bhargava Friday said regulatory compliance costs have pushed up the prices of small cars and the recently announced tax breaks in the Union Budget may not be enough to boost their sales. It is a fallacy to think that Indians now prefer sport utility vehicles over small cars because the country is getting richer, he told reporters in a post-earnings conference call.

"It's not as some people seem to think that India has become affluent and everybody wants to buy the expensive car. That would happen if the number of households having income above 12 lakhs increased from 12% to 50%. Then you would have this situation where there would be a big possibility of selling large cars, but that's not true today," Bhargava said. 

The Union Budget for 2025-26 (Apr-Mar) exempted individuals earning up to INR 1.2 million from paying income tax. Analysts were initially hopeful of this move reviving demand for small cars, but Bhargava said the average Indian household has other expenditures and requirements and buying a car is unlikely to be their top requirement.

EXPORTS - KEY DRIVER
With demand for automobiles falling in India, Bhargava does not expect FY26 to be any better. The Society of Indian Automobile Manufacturers estimates growth of passenger vehicles in India to be 1-2% for 2025-26, down from 8-9% some years ago.

"Maruti will do a little better than that (industry growth). But we are doing better, not because of domestic performance. We are doing better because exports have been very buoyant," Bhargava said. In FY25, the company sold 2.2 million units at a growth of 4.6% from FY24. The domestic sales grew only 2.7% on year, but the exports grew 18%. In FY26, the company expects to increase exports 20% year-on-year and they will be the main driver of its total production, sales, and profit.

While the sales of its newly launched electric sport utility vehicle 'e Vitara' will commence in India before the end of September, majority of this year's production will be exported, Bhargava said. Maruti Suzuki will launch one more sport utility vehicle in 2025, but did not divulge any more details on it.

In FY25, Japan was named among the top five export markets for Maruti Suzuki, alongside South Africa, Saudi Arabia, Chile, and Mexico. "We never had such a big volume of exports to Japan. Now we have two products, the 5-door Jimny and Fronx that is helping us to increase exports to Japan," Hisashi Takeuchi, managing director and chief executive officer of Maruti Suzuki said. 

Exports may drive their growth in FY26, but Bhargava doesn't expect Maruti Suzuki to be negatively impacted by the ongoing uncertainty because of tariff-led trade war, as the company currently does not export to the US. "And I don't see that many countries in the world, if any at all, are going to follow the example of the USA and also raise high tariffs on imports because the countries where we export are countries which actually want these cars because they don't have an industry," Bhargava said. While some companies have reportedly expressed fears over India lifting import duties on car imports, Bhargava feels trade barriers in India should come down.

INDIA GROWTH MUTED

For Maruti Suzuki, demand in local markets remained muted even as exports grew substantially. The Alto maker had planned on opening up a second production plant in Gujarat, on top of the new Kharkhoda plant in Haryana. However, given the softness in demand and "extremely limited growth", Bhargava said the company is in no rush to put up a second plant in Gujarat as there simply isn't enough demand. 

"There is no hurry about doing anything there because the market growth of 1-2%, why would I put up another million units in a hurry? Unless the market shows there's a need. I have enough capacity coming up in Karkhoda, some is coming up in Manesar, some is coming up in Gujarat first plant. There is no hurry about the Gujarat second plant," Bhargava said. 

The company has a capital expenditure budget of INR 80 billion-INR 90 billion for FY26. The first unit of Kharkhoda unit has already been commissioned, but Bhargava said commissioning of the second unit will be decided based on market situation.

In accordance with government directives, all cars made by Maruti Suzuki this year will be equipped with six airbags. Maruti Suzuki, which has a retail market share of 41%, plans to increase it gradually through launch of newer models and variants. The company plans to use retail market data available on government's Vahan portal to accurately plan and keep inventory levels at dealerships. This will help the company ensure there is no surplus of vehicles dealerships don't sell, which usually leads to big discounts, Bhargava said. 

Maruti Suzuki disclosed its March quarter earnings during market hours. It reported a net profit of INR 37.1 billion on revenues of INR 406.7 billion. Both missed estimates as expenses swelled. Shares of the company closed 1.7% lower on the National Stock Exchange at INR 11,698.  End

Edited by Vandana Hingorani

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (11) 4220-1000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2025. All rights reserved.