Maruti Suzuki India is banking on India's general election to stoke consumer sentiment and revive demand for vehicles, after the country's biggest carmaker by sales posted its first profit decline in six quarters.
Maruti Suzuki, like Tata Motors Ltd and all other Indian automakers, has seen sluggish sales over the past two years as high inflation pushed up prices while slow economic growth prevented incomes from keeping pace.
Prospects of a pick-up in the economy after a new government is installed come mid-May could spur a marginal rise in car sales in the fiscal year that started this month, according to an industry body.
"Like a lot of people in this country we are also hoping that post election results, post the new government there will be an improvement in conditions - sentiment will improve and there will again be a revival of the car market," Chairman RC Bhargava said after an earnings briefing on Friday.
Maruti, controlled by Japan's Suzuki Motor Corp, said net profit fell 36 percent to 8 billion rupees ($131 million) in January-March, compared with the 9.10 billion rupees mean estimate of 18 analysts polled by Thomson Reuters I/B/E/S.
The decline was steep because of a one-off gain in the year-earlier period, though it was exacerbated by reduced sales volume, higher promotional spending and compensation paid to dealers to offset a price decline brought about by a tax cut.
Revenue fell 9.5 percent to 118.18 billion rupees.
Shares of Maruti closed 1.3 percent lower on Friday after falling as much as 3.3 percent, compared with a 0.8 percent loss in the BSE Index. Since the beginning of 2014, they have risen 10.9 percent versus the benchmark's 7.2 percent gain.
Maruti is prepared for a demand recovery thanks to having a wide dealership network, a long reach in rural areas and a strong pipeline of new vehicles, the latest of which being the Celerio hatchback, analysts say.
"Maruti now embarks on its best-ever phase of new model launches with 14 new models over 2014-18. Many of these are in new segments for the company, such as compact SUVs, crossovers, higher-end sedans and LCVs (light commercial vehicles)," said brokerage Nomura in a recent research note.
"Thus, the growth visibility for Maruti appears high," Mumbai-based analysts for Nomura said.
Maruti on Friday said without elaborating that it expects to launch three vehicles in the current fiscal year.
The company makes vehicles at factories in Manesar and Gurgaon in northern India and plans to seek shareholder approval to source vehicles from a plant to be set up by parent Suzuki.
Maruti changed some terms of the plan to satisfy investors who favoured in-house production, and Suzuki may have to invest an extra 30 billion rupees as a result, Bhargava said. He also said the shareholder vote would likely be after August-September.
($1 = 61.0550 Indian Rupees)