Maruti Suzuki keeping close watch on Covid crisis, no cut to FY22 capex

Maruti Suzuki India on Tuesday said it is keeping a close watch on the COVID-19 situation in the country and impact of oxygen availability to its parts suppliers although it is continuing with full production to meet the robust demand.

The company also said the semiconductor shortage continues to be an issue and will be there for sometime but it has not cut down on its capex for the ongoing fiscal despite the challenges of the pandemic.

Addressing a virtual press conference, Maruti Suzuki India Chairman R C Bhargava said despite the surge in COVID-19 cases in the second wave of the pandemic, the company has been able to continue with full production.

“We are producing at full capacity, there is no shortage of anything and the labour is available. The demand for personal mobility will strengthen further due to the second COVID wave in the country; it is not going to weaken. More and more people would now like to have personal transport,” he said.

He said the company has 1,280 active cases of the virus among its workers out of total of around 30,000 and therefore it hasn’t faced much of a manpower shortage.

On the demand side, he said it continues to be steady at the moment although it is difficult to forecast for a longer period considering the current circumstances.

“So far sales have not been impacted, we are able to sell everything which we can produce and send out to the market. The progress of the covid during the remaining part of this quarter is uncertain and nobody knows what will happen. So, we would not like to make a long term forecast,” Bhargava said.

When asked about impact on sales due to curfew imposed in some states, he said, “So far the conditions are fine and enough markets are open for us to sell what we are producing as there has been continuous shortage of supplies in relation to demand…Our situation has been consistently steady so far and if it continues like this this quarter should be a decent quarter for us.”

The issue currently is the company’s inability to meet demand with a backlog of orders of around 90,000 units, he said.

Even last fiscal, he said the Maruti could have sold another 1.2 lakh units more had it not been for production constraints.

Asked if the company will also go in for shutdown of its factories like some other companies had done, he replied in the negative but added “there are factors which we are watching as to how covid progresses, new restrictions come, what impact, all these things are issues which I think cannot be predicted.”

On the imapct of the health crisis on rural demand, he said,”There is no evidence of that at all and the COVID is very much an urban disease, not rural disease at all, so I don’t see rural demand getting affected due to this pandemic.”

Bhargava, however, said the oxygen availability will be something that Maruti Suzuki India will have to keep a close watch, despite the company not being a major user of the gas, as many of its part suppliers and steel makers are heavy users. On the semiconductor shortage, he said the issue is not going away anytime soon and is “going to be with us for sometime”.

Stating that the company is managing it on a short term basis, Bhargava said Maruti has adjusted production of certain models in order to meet demand.

“It is hazardous to guess how it will be over a long period of time,” he said. On exports, Bhargava noted the company has set a target of 1.3 lakh units for the current fiscal.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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