Maruti Suzuki India Ltd chairman R.C. Bhargava on Tuesday said the decline in sales of cars priced under ₹10 lakh is a cause of worry.
“80% of the cars sold in India in 2018-19 were under ₹10 lakh. That market is not growing at moment which is a cause of worry… If 80% of what used to be the market is declining, how will the other make up for the rest of the growth?” Bhargava says in a media conference call after the automaker’s second quarter earnings announcement.
The chairman of India’s largest carmaker says lack of affordability is the key reason for the drop in car sales in this segment.
Unless that lower end of the market grows, there are going to be no feeders to the upper end of the market, cautions Bhargava. “The fact that growth is taking place only in expensive cars, that doesn’t make me very happy,” he says.
India’s automobile industry is having disappointing growth this year. Maruti Suzuki expects volumes to grow 3-4% in 2024-25. That’s broadly in line with the outlook shared by industry body Society of Indian Automobile Manufacturers (SIAM).
“The industry is somewhat slower that what has been in the past. This is despite the fact that there are no shortages of semiconductors or impact of Covid or any such thing. It’s just that demand for cars has slowed down. But despite that Maruti’s results show that we have performed very well. Our profitability is good. Our turnover is the highest ever,” Bhargava says. “We don’t have enough data to tell us whether this slowdown would last for a long time.”
The automaker is counting on the festival season to boost retail sales. “We are expecting roughly 14% growth in retail sales in the festive season and that will help reduce inventory levels,” says Bhargava.
Maruti Suzuki’s wholesales have gone down by about 4% in the September quarter, cutting down high inventory levels at dealerships. “If you create large inventories, you will have to give more discounts to clear that. If you get inventories down to a much more reasonable level, the pressure to give discounts is not there,” says Bhargava.
India’s passenger vehicle market will fluctuate and not always remain steady, says the Maruti Suzuki chairman. “We have had some good times, we have also had bad periods in the past. We are a company which has the strength to ride over bad and good times,” says Bhargava.
While rural demand is strong, the urban market is under pressure, says Partho Banerjee, senior executive officer, Marketing and Sales, Maruti Suzuki. In the first of the ongoing fiscal, the rural market’s growth has been to the tune of 8% but the urban market witnessed 2% de-growth, says Banerjee.
Consolidated net profit of Maruti Suzuki slipped 18% year-on-year to ₹3,102 crore for the quarter ended September. “PAT (profit after tax) is lower because of the taxation change that was made in the Budget in terms of indexation benefit which was available to long-term debt mutual funds. That has resulted in us having to make a provision of ₹837 crore,” says Bhargava.
The carmaker sold 541,550 vehicles during the quarter, of which the domestic market volume was 463,834 vehicles and the export volume was 77,716 vehicles. While the domestic volume declined by 3.9%, the export volume grew by 12.1% compared to the same period of the previous year.
