Amid supply issues, Maruti says it expects no slowdown in demand
The country’s largest carmaker Maruti Suzuki on Tuesday said that there was enough demand among buyers while the company continues to face supply-side issues which impacted the production, resulting in a decline in volumes on year.
“There was no lack of demand as the company had more than 240,000 pending customer orders at the end of the Quarter. Month on month booking inflow has been pretty steady of around 6,000 bookings per day,” company’s senior executive director marketing and sales Shashank Srivastava said.
Srivastava said that while passenger vehicle sales lagged behind in the last few years due to increase in acquisition cost, going ahead it will show a CAGR of around 7-8 per cent.
The commentary of good demand from India’s largest carmaker is a positive sign for the industry that is currently struggling with poor sales. The passenger car sales in India have been falling for four months in a row since September.
Automobile industry in India is going through a long-term structural slowdown as the compound annual growth rate (CAGR) across all major vehicle segments has witnessed a decline over the last three decades, according to industry body SIAM.
From a CAGR of 12.9 per cent between 2004-05 and 2009-10, it came down to 5.9 per cent in the 2009-10 to 2014-15 period. However, in the last five-year period, between 2014-15 and 2019-20, the CAGR of the passenger vehicle segment has dropped to just 1.3 per cent, data from SIAM showed.
“There were various factors including regulation requirements like conversion from BS IV to BS VI and other safety requirements which increased the acquisition cost of a car and prevented growth in FY 19-20. However, if you look at the future, I think we can look at CAGR growth in line with the economy which will be around 7-8 percent,” Srivastava told analysts in a post earnings call.
Srivastava said that rural sales for the company has been growing and he expects it to remain strong. “We expect rural sales to continue to remain strong. This is primarily because Kharif crop has been strong, sowing of ravi crop and Minimum Support Price is going up,” he said.
However, the company and the industry continue to remain plagued due to the shortage in semiconductor chips which is not allowing factories to reach full production level.
Maruti recorded a sales volume of 430,668 units during the quarter under review. This was 13 percent lower than 495,897 units it sold in the same period last year.
The dent in Maruti Suzuki figures reflect a general slowdown in the automobile industry triggered by a global shortage in the supply of electronic components. The component crisis pruned the output from the Maruti stable by an estimated 90,000 vehicles.
The company said that despite the situation improving, it doesn’t expect to return to full production immediately. “Though still unpredictable, the electronics supply situation is improving gradually. The company hopes to increase production in Q4, though it would not reach full capacity,” it said in a statement.
The company reported a standalone net profit of Rs 1,011 crore for the third quarter ended last December, down 48 percent from Rs 1,941 crore, it reported a year ago. The company’s net profit stood at Rs 475 crore in the previous quarter.
Standalone revenues for the Gurgaon-based carmaker stood at Rs 23,246 crore, down 1 percent, compared to Rs 23,458 crore reported a year back. The preceding quarter saw the top line at Rs 20,538 crore.
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