Amidst slowdown in sales of cars, market leader Maruti Suzuki has cut its domestic volume growth for the current fiscal by a third to 2%. The new FY14 forecast was announced by Japanese parent Suzuki Motor Corporation (SMC) on August 1, as part of its financial results announcement for the April-June FY14 quarter. SMC has a 56.21% stake in Maruti.
Maruti, a leader in small cars, which accounts for 53% of India’s 2.7 million passenger vehicle (PV) market, had till now given a forecast of a 4-6% growth in domestic retail sales for FY14. Interestingly, company dealers have been given a far higher target of 10% volume growth for the fiscal. According to latest estimates by the Society of Indian Automobile Manufacturers, the country’s total PV sales in FY14, is expected to grow by 5-7%.
RC Bhargava, chairman of Maruti Suzuki told FE that a 6% growth estimate had been given at the starting of the year, but something closer to 4% might be more possible. “Between 2% and 4%, there is not much difference. In my experience, I don’t think I have seen an economic situation as bad as this. There doesn’t seem to be a light at the end of the tunnel,” he said.
A drop in demand and excess production capacity has led Maruti to shut its two plants in Gurgaon and Manesar several times this year (June output went down 25%), while asking about 400 temporary staff to go on leave. This fiscal till date (April-July FY14), Maruti’s domestic volumes have dipped 4.13% at 3.20 lakh units, while total PV sales for the industry fell 7.49% at 7.93 lakh units. In FY13, Maruti had recorded a 4.44% growth at 10.51 lakh units, while total PV segment sales had gone up 2.15% at 26.86 lakh units. Maruti currently has just over 40% market share in the PV segment. Rivals such as Hyundai, Tata Motors and Mahindra have also posted 3.23%, 34.82% and 8.42% drop in volumes respectively in the April-July FY14 period.
What is a worrying trend for carmakers is the quick shift in demand patterns – from petrol to diesel cars, from sedans to SUVs, which takes time for manufacturers to adjust. An example is the demand for utility vehicles which had grown 52% in FY13, but in July this fiscal posted its first drop in over four year (17.5% decline).
“Just when you have a