Maruti Suzuki cuts production by 5.38% at 1,40,933 units in February

The country's largest carmaker Maruti Suzuki India cut production by 5.38 per cent in February at 1,40,933 units, according to a regulatory filing by the company. Maruti Suzuki India had produced a total of 1,48,959 units in the same month last year.

Total passenger vehicle production stood at 1,40,370 units last month as against 1,47,550 units in February 2019, a decline of 4.87 per cent, it added.

The company increased production of its mini cars comprising Alto, and S-Presso by 5.16 per cent at 29,676 units as against 28,221 units in the year-ago month.

However, it reduced production of compact cars, including WagonR, Celerio, Ignis, Swift, Baleno, OEM Model (Glanza supplied to Toyota) and Dzire by 5.55 per cent at 75,142 units as compared to 79,556 units in February last year.

Production of mid-sized sedan Ciaz was at 2,950 units last month as against 2,729 units in the same period a year ago, an increase of 8 per cent, the company added.

Similarly, utility vehicles consisting of Gypsy, Vitara Brezza, Ertiga, XL-6 and S-Cross models also witnessed increase in production by 7.9 per cent at 21,737 units as compared to 20,146 units in the year-ago period.

Vans, comprising Eeco and Omni, production stood at 10,865 units as compared to 16,898 units in February last year, down 35.7 per cent.

Maruti Suzuki said its light commercial vehicle, Super Carry production was reduced 60 per cent at 563 units last month from 1,409 units in February last year.

 

Maruti, Hyundai, Toyota see no impact of coronavirus on production so far

Major automobile manufacturers Maruti Suzuki, Hyundai and Toyota Kirloskar Motor do not see any immediate impact on their production schedules due to disruption in supply of components from plants located in coronavirus-hit China.

The companies, however, continue to monitor the situation closely, especially the operations of their major suppliers, in order to face any adverse situation that crops up in the future.

"We do not foresee any problem as of now. We will keep in touch with our suppliers and will inform if there is any issue", a Maruti Suzuki India spokesperson told PTI when contacted over the issue.

A Hyundai Motor India spokesperson said, "We are closely monitoring the situation. However, at the moment there is no impact on the functioning of the company."

Similarly, Toyota Kirloskar Motor (TKM) said there has been no immediate impact so far on supply of parts and its production from the outbreak of coronavirus in China.

"Our tier-I and tier-II suppliers are not yet effected. However, we are continuously monitoring the operations of tier-III and tier-IV suppliers to grasp any possible slowdown that may come forth due to the slowdown in logistics flow in China, especially Wuhan," TKM Senior Vice President (Sales and Service) Naveen Soni said.

The company focuses on increasing the supply base through localisation of parts and components, thereby providing an opportunity for local suppliers, he added.

TKM remains committed to effectively contribute towards government's 'Make in India' mission, and has developed a global supplier base and supply chain in India in a period of 20 years, Soni said.

"These localisation efforts have also ensured a smooth transition of our manufacturing plant to 100 per cent BS-VI manufacturing facility from January 2020 without any significant supply roadblocks. Simultaneously, our dependency on multi-sourced parts has allowed us flexibility of sourcing from other countries when China has an impact," he added.

Kia Motors India said its production has also remained unaffected so far.

"The coronavirus hasn't impacted us till now, but we are keeping an eye on the development for gauging the future impact," a company spokesperson said.

MG Motor India, however, reported disruption in supply chain which impacted its production and sales performance in February.

"The unforeseen coronavirus outbreak has severely affected our European and Chinese supply chains, disrupting our production and impacting our sales in February and will continue through March," MG Motor India Director Sales Rakesh Sidana said.

The company is working towards stabilising the situation and is hopeful that reasonable normalcy will be restored by the end of March, he added.

Tata Motors declined to comment on the issue, but its CEO and Managing Director Guenter Butschek had earlier this month said that clarity about supply constraints of components from China will only emerge when workers in the coronavirus-hit country rejoin work.

The company imports certain components for both Nexon EV and other traditional models from China.

Auto industry body Society of Indian Automobile Manufacturers (SIAM) had earlier said that it will collect information and data from its members to understand if there could be disruptions, and to what extent, if any.

Two-wheeler makers Hero MotoCorp and TVS Motor Company had said earlier this month that coronavirus (COVID-19) outbreak in China would hit their production by around 10 per cent in February.

Citing disruptions in automotive supply chains due to coronavirus outbreak, rating agency Moody's has already lowered its global auto sales forecast.

Similarly, the Association of Indian Forging Industry (AIFI) said that disruption in supplies due to the coronavirus outbreak in China has hit domestic forging industry along with automobile and auto component manufacturing sectors.

The domestic automobile industry, which has been riding through the worst slump in two decades, is likely to be negatively impacted and its supply chain disrupted if the coronavirus outbreak in China and South-East Asia persists longer, rating agency Icra had said last week.

Around 3,000 people have lost their lives in China due to the disease so far.

Cases of coronavirus have also emerged in various other countries, including South Korea, Japan, Iran, Italy and Singapore.

Rural market turns positive for carmakers on the back of good monsoon

While the price sensitive rural markets turned positive for major carmakers on the back of improved sentiment thanks to a good monsoon and better crop, the question is whether the momentum will continue during the BS-VI era, which will see an increase in prices.

Rural sales of the country's largest passenger car maker Maruti Suzuki India Ltd (MSIL's) increased by 2 per cent and accounted for 38 per cent of company's sales during the quarter ended December, 2019. During the same period, however, the urban market grew by 0.6-0.7 per cent, said Shashank Srivastava, executive director, marketing & sales, MSIL.

Speaking on the way forward, Srivastava said that the challenge lay in converting enquiries into sales once prices went up after the BS-VI transition.

Meanwhile, Tarun Garg, director, sales and marketing division, Hyundai Motor India Ltd, added that things were really improving in the rural market. "One year back there was a lot of stress. In the Indian market, for the last four five years, all the growth was coming from the rural market. Then for 6 to 8 months things were quite bad. However, this year the monsoon was quite good and we are seeing some kind of a turnaround," he said.

The entire industry, in the April to June and July to September periods, showed a double-digit degrowth both in rural and urban markets. However, this has become more flattish in the December quarter. "We are now witnessing a flat growth in rural areas," Garg said, adding that the industry is expected to see an improvement in growth by the second half of this year.

"We are positive about the near future, but at the same time we cannot expect double-digit growth or something like that. We are looking at low single-digit growth in rural markets," added Garg.

According to Motilal Oswal, initial signs of rural sector bottoming out are emerging, as indicated by return of food inflation, favourable 'terms of trade' for farmers, multi-year high rural spending by the Centre, unusually good water reservoir levels and good start to the Rabi season.

Importance of the rural market has been increasing consistently - especially in the last 2-3 years - when rural market growth was around twice that of the urban market. This is reflected in increasing contribution of rural markets to auto volumes (40%/45% of volumes for two-wheelers/passenger vehicles), said an anlayst from Motilal Oswal.

Faster rural growth was driven by expansion in the distribution network and increasing finance penetration, resulting in easy product accessibility for the rural customer. However, 2HFY19 onwards saw auto volume momentum in the rural market get impacted due to culmination of several headwinds.

In the normal course, two-wheelers would have benefitted the most from rural recovery. However, 10-15% cost inflation in mainstream two-wheelers would dilute benefit of rural recovery. The two-wheeler segment should get impacted by the 7-15% increase in ex-showroom price. Also, there is a risk of value migration within the segment (down trading from Executive 100cc to Economy segment, 125cc Scooter to E-Scooter, etc.). While MOSL estimate around 6% volume growth for the two-wheeler industry in FY21, there is a risk of mix deterioration as well as a change in competitive dynamics.

Tractors are best placed to benefit from the rural recovery due to high correlation with farm economics as well as no BS-VI related challenges. Tractor volumes are expected to recover from the nearly 11% decline in 9MFY20, driven by favourable farm economics and positive sentiment in the on-going Rabi season. MOSL expects volume recovery to reflect from March 2020 and estimates 8-10% volume growth in FY21 for the tractor industry.

Passenger vehicles (PV), particularly petrol PVs, should be the least impacted due to BS-VI transition.

Maruti Q3 preview: Analysts see healthy nos due to recovery in sales volume

India's largest car manufacturer Maruti Suzuki is expected to report healthy numbers when it announces its December quarter results (Q3FY20) later in the day, courtesy recovery in sales volume and benign raw material prices. According to the monthly sales data, Maruti's total dispatches in Q3FY20 came in at 4.4 lakh units, up 2 per cent on a year-on-year (YoY) basis. Average sale price (ASP) for the quarter are expected to improve on account of the wide acceptance of BS-VI variants.

Consequently, analysts see double-digit growth in the company's top-line as well as the bottom-line.

Analysts at ICICI Securities have pegged Maruti's Q3FY20 profit after tax (PAT) at Rs 2,047 crore, up 37.5 per cent YoY. In comparison, the company had reported Rs 1,489.3 crore as PAT in the year-ago quarter.

Further, the brokerage house expects Maruti's total operating income in Q3FY20 at Rs 22,346 crore, up 13.6 per cent YoY, and 31.6 per cent QoQ.

Kotak Securities expects Maruti's Q3FY20 revenue at Rs 22,707.8 crore while profit is seen at Rs 1,746.4 crore, up 17.3 per cent on a YoY basis.

"We expect revenues to increase by 16 per cent yoy in 3QFY20 led by 2 per cent increase in volumes and 9 per cent yoy increase in ASPs due to introduction of new safety regulations for entry-level cars and migration of the petrol portfolio to BS-VI," the brokerage said.

According to the brokerage, Maruti's earnings before interest, tax, depreciation and amortization (EBITDA) is likely to increase by 33 per cent YoY in the quarter, led by an increase in revenues and 150 bps expansion in margin driven by operating leverage benefits, partly offset by higher discounts. The brokerage house sees Maruti's Ebitda at Rs 2,567.3 crore compared to Rs 1,931.1 crore in the year-ago quarter, a 32.9 per cent YoY growth.

According to Reliance Securities, realisation is expected to have grown by 9 per cent due to product-mix and price hikes. Better operating leverage and product-mix would expand margin despite higher discounts.

Meanwhile, Prabhudas Lilladher has retained a strong overweight on Maruti as it is expected to be the first and biggest beneficiary of a demand revival.

At the bourses, Maruti outperformed the benchmark index during the October-December quarter by surging 8.6 per cent as compared to 7.7 per cent gain in the S&P BSE Sensex.

Q3 preview: Automakers likely to post subdued sales, improved margins

As Maruti Suzuki kicks-off the third-quarter earnings season for automakers on Tuesday, most analysts expect the companies to report a subdued performance for the period under review amid muted demand leading to lower volumes and higher discounts. Based on the monthly sales figures, wholesale volume de-growth trend continued for the domestic automobile space largely due to weak economic growth, rising cost of ownership coupled with inventory correction by original equipment manufacturers (OEMs). Overall, volume declined around 13 per cent year-on-year during the quarter, amidst sharp retail uptick in the festive period.

Consequently, brokerage houses estimate that automakers may report, on average, around 5 per cent drop in sales and 8 per cent decline in bottom-line even though the performance is likely to be better on a sequential basis. On the margins front, benign raw material prices (steel, rubber) will aid gross margin recovery for most of the companies, the extent, however, limited by perils of negative operating leverage.

Companies that are expected to record steep fall in revenue as per reports include Ashok Leyland (down 34% YoY), Hero MotoCorp (down 13% YoY), and TVS Motor Company (down 12% YoY). Among the relative outperformers, Maruti Suzuki India is expected to report 9 per cent YoY growth in revenue, while Bajaj Auto may also report a 5 per cent growth.

Besides Maruti, analysts at IDBI Capital also expect Bajaj Auto (9%) and Eicher Motors (4%) to report volume growth on YoY basis. The brokerage firm said the slowdown in the auto segment in Q3FY20 would also impact the overall performance of auto ancillary companies.

As for the bottom-line, Sharekhan pegs net profit for the major automakers to drop by around 8 per cent while Prabhudas Lilladher expects a much larger 26 per cent dip. On the other hand, analysts at ICICI Securities expect automakers' profit after tax (PAT) to increase 3 per cent year-on-year which it attributes, in part, to transition to lower tax rate (25.2 per cent) for the quarter.

MARGIN EXPANSION LIKELY

According to Prabhudas Lilladher, margins are likely to expand around 60-80 basis points (bps) for major firms, led by benefit of soft raw materials which would be partially offset by higher discounts and weak product mix. DBS expects margins to expand 90bps YoY for major firms on a low base, softening input prices and cost-reduction measures. Tata Motors (200 bps YoY), Bajaj Auto (110 bps) and Maruti Suzuki (100 bps) are expected to report strong margin performance. Companies that are likely to register a steep decline in margins are Ashok Leyland (-440bps), Eicher Motors (-320bps), Escorts (-110bps) and Exide (100bps).

THE ROAD AHEAD

Going forward, a general slowdown in the economy, increase in vehicle prices, BSVI transition, liquidity conditions and low buying sentiment among customers would continue to impact four-wheeler and two-wheeler retail sales, IDBI Capital said in a note. Those at BNP Paribas are 'cautiously optimistic' on the sector for the year 2020, but rule out a significant improvement in the year ahead.

"In Q1FY21, pre-buying is expected to happen but auto manufacturers may be forced to resort to discounting in order to clear BS-IV models, given the weak demand conditions. As the BS-VI emission norms are implemented effective April 1 2020, prices of all BS-VI models are estimated to rise.This has the potential to keep demand suppressed for a quarter or two in our view," said Abhijeet Dey, a senior fund manager for Equities at BNP Paribas

CCI looks into allegation against Maruti Suzuki over car insurance: Report

India's antitrust regulator is looking into allegations that Maruti Suzuki, the country's biggest car maker, pushes buyers to purchase insurance policies offered by the company, two sources with direct knowledge of the matter told Reuters.

The Competition Commission of India (CCI) in June last year received an anonymous complaint alleging insurance plans recommended by Maruti while selling cars resulted in customers paying more compared with other options in the market.

Based on the complaint, the CCI is assessing whether Maruti has engaged in so-called "tie-in arrangements", in which a car maker promotes preferred suppliers of complementary goods such as lubricants or insurance, the sources said.

Indian law says such practices are anti-competitive if they end up stifling competition and limiting consumer choices.

The Commission is looking into the complaint and "it will take a while", said one of the two sources, who declined to be named as the case details are private.

In response to Reuters questions, a Maruti spokesman said: "We are not aware of any such alleged complaint that is being investigated by CCI and therefore cannot comment on the same." The CCI did not respond to a request for comment.

The watchdog can still throw the complaint out if it finds no merit in the allegation, or order a deeper probe by its investigations arm.

Maruti is already the subject of another antitrust investigation in India. Last year, the CCI ordered its investigations unit to probe allegations the carmaker limits discounts its dealers can offer, a prohibited anti-competitive practice if it hurts consumers.

If the CCI decides to launch a wider probe into the new complaint, it could ask its investigation unit to wrap it into the ongoing case into Maruti's discounting practices, or order a fresh investigation, the second source said.

It was not clear over what period the anonymous complaint about insurance sales relates to.

Maruti, majority-owned by Japan's Suzuki Motor, is a market leader in India with a 50% share of the passenger vehicles market. It sold 1.73 million cars in the fiscal year ending March 2019 and has around 3,600 sales outlets.

The allegation of insurance tie-up arrangements against Maruti is similar to an earlier complaint against its competitor, South Korean carmaker Hyundai Motor Co, a third source aware of the complaint told Reuters.

In 2014, following a complaint from a car dealer, the CCI found initial merit in the allegations that Hyundai had entered into several tie-in arrangements, including to promote certain insurance companies, and ordered a wider investigation.

However, in its final order in 2017, the CCI said Hyundai's insurance arrangements were not anti-competitive.

"The most credible way for Maruti to show there is no tie-in would be by providing actual data on Maruti car buyers opting for insurers other than those recommended by it," said Rahul Rai, a New Delhi-based lawyer specializing in antitrust law.

Maruti Suzuki annual sales slump 12.3% in CY19, worst in a decade

Maruti Suzuki India ended 2019 with a drop of 12.3 per cent in its annual sales. The fall, the steepest in almost a decade, came on the back of poor economic growth and a slowdown in overall consumption. India’s economy grew at an anaemic 4.5 per cent in the September quarter, the lowest in five years.

Entering 2020, Maruti is optimistic, even as it remains cautious of the disruptions expected in the next couple of months, ahead of the implementation of BS-VI and high cost of ownership, said a top executive of the company.

During the year, the maker of the bestselling Baleno and Brezza, saw its sales volumes contract to 1.6 million units in the domestic market, from 1.8 million units a year ago, according to Bloomberg. This is only the second time that the local arm of the Japanese firm has seen sales drop in 12 years. Maruti’s sales skidded 8.1 per cent to 1.1 million units in 2011, from 1.2 million a year ago.

“2019 was quite challenging. Going forward, there are reasons to be cautious as well as optimistic,” said Shashank Srivastava, executive director, marketing and sales. A reduction in finance rates and an uptick in rural sales are positives, he said, adding a low dealer inventory will aid sales.

He, however, cautioned that the cost of ownership is expected to remain elevated this year. This, in turn, could be a deterrent. He said sales might stabilise in the months subsequent to BS-VI. Launch of petrol BS-VI variants of the Brezza and S-Cross will also bump up Maruti’s sales.

Meanwhile, Maruti is betting big on CNG models to fill the void that gets created after it discontinues production of diesel cars from April. It expects sales of CNG models to get a boost if the government cuts the goods and services tax (GST) rate on such vehicles.

A slew of policy changes, increase in the cost of ownership which came on back of higher insurance premium, increase in road tax, and a liquidity crisis weighed on buyer sentiment. Confusion over the switch to BS-VI and talks of a possible reduction in GST rate on auto also prompted buyers to postpone purchases, said Srivastava. A deacceleration of the economy also added to the woes, he said.

“All adverse factors acted together in 2019,” said Mitul Shah, analyst at Reliance Securities, pointing out that the headwinds would continue for the next couple of months till BS-VI takes effect.

Maruti Suzuki Dzire takes top slot in April-Nov, captures 60% market share

Maruti Suzuki India (MSI) on Tuesday said its compact sedan Dzire has become the best selling car in the country in the first eight months of the current fiscal with sales of over 1.2 lakh units.

The company said the model currently has around 60 per cent market share in the compact sedan segment.

"Over years, Dzire has created a niche for itself amongst compact sedans. Gaining widespread acceptance, the model was conceptualised keeping in mind the customer demands," MSI Executive Director (Marketing & Sales) Shashank Srivastava said in a statement.

The third generation version of the model was launched in May 2017.

Cars to get pricier in new year: Maruti announces price hike amid slowdown

Even as automobile sales have hit a record low, the country’s largest carmaker, Maruti Suzuki, on Tuesday announced a price hike across models from January. Others are likely to follow suit as they gear up to liquidate the stock ahead of rolling out new models in 2020.

Rising input cost, along with the transition of auto firms from BSIV to the more expensive BSVI models, has prompted the industry to hike prices, analysts pointed out. Besides Maruti, Mahindra & Mahindra and Toyota Kirloskar are already working on a price hike. Some others are watching the space before taking a call. This comes soon after another financially stressed industry — telecom —decided to hike tariffs.

According to a regulatory filing by Maruti on Tuesday, the cost of the company’s vehicles had been impacted adversely due to the increase in various input costs. “Hence, it has become imperative for the company to pass on some impact of the above additional cost to customers through a price increase across various models in January 2020,” the company, which saw its November sales dip 3.2 per cent from a year ago, told the BSE without indicating the extent of the hike.

Primary steel producers in the domestic market have raised product prices by 2.5 to 3 per cent for December to address margin compression and in anticipation of a demand pick-up. That has pushed up the cost for automakers.

The price hike announcement at this point may boost sales in the short-term if buyers advance their purchase, analysts believe.

Cars to get pricier in new year: Maruti announces price hike amid slowdownPassenger vehicle sales in India have declined in 11 out of 12 months as poor economic growth has weighed in on buyers' sentiments. The GDP grew 4.5 per cent in the second quarter of FY20, marking the slowest expansion in six years. The index of eight core infrastructure industries contracted 5.8 per cent for October 2019, hitting a new low. Among the eight segments, the steel industry witnessed a 1.6 per cent fall in October, worse than a 1.5 per cent drop in September.

Led by festivals and steep discounts, passenger vehicle sales rose 0.28 per cent in October, over a year ago period. With the festive fervour drying up, sales slipped again in November. Soon after the Maruti announcement, a spokesperson at Mahindra and Mahindra said the company was “contemplating a hike in early January”.

A decision will be taken later this month.

The increasing transition cost along with the rising discounts have put pressure on the firms’ expenditure, thereby hitting their bottom line, Nikunj Sanghi, MD & Founder of JS 4Wheel Motor Private Limited, pointed out.

Toyota Kirloskar Motor is among the auto firms to have decided to bite the bullet.

Maruti's milestone: 20 mn passenger vehicles sold in its 37th year

The country's largest car maker Maruti Suzuki India on Saturday said it has crossed milestone of 20 million passenger vehicle cumulative sales in the Indian market.

The company accomplished this landmark number in less than 37 years of selling its first car on December 14,1983, when it first rolled out the iconic Maruti 800, Maruti Suzuki India (MSI) said in a statement.

The company said while it crossed 10 million vehicle sales in nearly 29 years, the next 10 million passenger vehicles were sold in a record time of 8 years.

Commenting on the milestone, MSI Managing Director & CEO Kenichi Ayukawa said, "We are overwhelmed with this new record. Achieving this milestone is a great accomplishment for Maruti Suzuki, as well as our suppliers and dealer partners".

MSI said it has introduced factory fitted CNG vehicles as well as smart hybrid vehicles, in addition to eight BS6 models rolled out much ahead of the stipulated timelines.

It along with its parent, Suzuki Motor Corporation, plans to introduce a small EV for the Indian market. Currently, it is road testing 50 electric Vehicle prototypes across the country to check their real-life performance in multiple terrains and varied climatic conditions, it added.

Maruti Suzuki 'cautiously optimistic' over sales prospect in coming months

The country's largest car maker Maruti Suzuki India (MSI) remains 'cautiously optimistic' over sales prospect going ahead as many of the challenges that led to slowdown in the auto industry still exist, a senior company official has said.

The company, which posted a growth in domestic passenger vehicle sales after seven months in October, said it would take at least few more months to get clarity if the industry is finally on a revival path.

"We are cautiously optimistic. The reason why we are cautious is that we do not have a crystal ball. Many of the factors like high cost of acquisition, confusion related to BS-IV and BS-VI, issues related to finance norms and liquidity etc, continue to be there," MSI Executive Director (Marketing & Sales) Shashank Srivastava told PTI.

He was replying to a query whether October sales were an indication of revival of the industry which has been grappling with demand slowdown for almost a year now.

"We are optimistic a little bit because the stock levels are manageable as the dealers money is freed up due to good retail. We need to look at the situation for couple of months before we conclude the real direction of the industry," Srivastava said.

The company's inventory level is now down to 30 days which is a positive factor, he added.

MSI made most of the festive season and posted a growth of 4.5 per cent in its domestic wholesales at 1,44,277 units in October as against 1,38,100 units in the same period last year.

Other carmakers like Hyundai, Mahindra & Mahindra and Toyota also managed to perform better over last month.

Tata Motors and Honda Cars India also improved sales in October from preceding months. Passenger vehicle wholesales in India declined for the eleventh consecutive month in September.

The slump in sales has forced various companies to cut production and manpower. Elaborating on the factors impacting sales, Srivastava said high acquisition cost remained a challenge.

"Cost of cars going up due to mandatory emission and safety norms, increase in road tax of up to 7 per cent across nine states and upfront payment of three years third party insurance have all increased the on-road price of a car," he noted.

Besides, liquidity crunch has made it difficult for the dealers and customers to get financing for inventory as well as purchase, he added.

Further, confusion in the mind of the customers regarding the transition of vehicles from BS-IV to BS-VI technology, availability of BS-VI fuel and lack of clarity whether a BS-VI compliant vehicle can run on BS-IV fuel have also impacted sales, Srivastava said.

Auto crisis: Maruti Suzuki reports 24% decline in sales in September

The country's largest carmaker Maruti Suzuki India (MSI) on Tuesday reported a 24.4 per cent decline in sales at 1,22,640 units in September.

The company had sold 1,62,290 units in September last year, MSI said in a statement.

Domestic sales declined by 26.7 per cent at 1,12,500 units last month as against 1,53,550 units in September 2018, it added.

Sales of mini cars comprising Alto and WagonR stood at 20,085 units as compared to 34,971 units in the same month last year, down 42.6 per cent.

Sales of compact segment, including models such as Swift, Celerio, Ignis, Baleno and Dzire, fell 22.7 per cent at 57,179 units as against 74,011 cars in September last year.

Mid-sized sedan Ciaz sold 1,715 units as compared to 6,246 units earlier.

Similarly, sales of utility vehicles, including Vitara Brezza, S-Cross and Ertiga, declined marginally at 21,526 units as compared to 21,639 in the year-ago month, MSI said.

Exports in September were down by 17.8 per cent at 7,188 units as against 8,740 units in the corresponding month last year, the company said.

Why the festival season may not bring much cheer despite tax cuts by govt

Poor demand from Indian consumers could dampen the mood during festivals next month, especially for automobile makers and retailers that count on the season for a sales boost, analysts predict.

Indians typically buy everything from new cars to shoes for themselves and as gifts during celebrations steeped in religion and tradition. Yet the slowest economic growth in six years, unemployment at a 45-year high and tepid private consumption may see sales fall short of recent years, even after the government’s $20 billion tax break to companies earlier this month.

“You can make the product 50% cheaper, but there has to be income to spend,” said Nitin Gupta, an analyst at SBICAP Securities Ltd. in Mumbai. “In the short-term, I don’t see any kind of an income boost. Rather than giving cash to individuals, they have given it to companies.”

Car sales in August fell the most on record and Maruti Suzuki India Ltd. Friday reduced the price on its Baleno RS model by 100,000 rupees ($1,420) to pass on the benefit from the tax cut. Market researcher Nielsen has lowered its 2019 growth estimate for fast-moving goods to 9%-10% from 11%-12%, while a stock gauge of consumer discretionary firms is set for its first annual back-to-back losses since at least 2005.

Even so, the industry’s fortunes beyond the approaching festival season are poised to improve, according to BNP Paribas SA. Plentiful rainfall seen this monsoon season and cash handouts to farmers will help lift rural incomes, helping sales of staples recover in the second half of the year that began April 1, the brokerage said in a recent report.

Poor demand from Indian consumers may dim festive cheer despite tax cut

Here’s what other analysts say:

SBICAP Securities’ Gupta

The festive season is likely to be dull. Consumption is hit and household income has to increase for there to be better demand for companies selling fast-moving consumer goods.

Corporate tax cuts are a long-term phenomena and won’t help in the short term.

It’s uncertain how much companies could pass on the benefit in terms of lower prices.

Recommends buying shares in Dabur India Ltd., holding ITC Ltd., Colgate-Palmolive India Ltd., and Hindustan Unilever Ltd., and selling Nestle India Ltd.

Harshit Kapadia, an analyst at Elara Securities India

I’m not expecting a blockbuster festive season. It won’t be muted either, but will be decent. Even last year demand was largely flat, that’s why double-digit growth in demand on the lower end is possible.

Distributors are preparing for the Navratri and Diwali season, but nobody is stocking up heavily. They are following the normal trend of keeping 15-20 days of inventory, whereas in past years they would keep 30-35 days ahead of the festival season

Recommends buying Havells India Ltd. and selling Voltas Ltd. shares

Ravi Swaminathan, an analyst at Spark Capital Pte

Sales growth in refrigerators and washing machines has been moderate (mid to high single digit).

With early festive demand traction not very encouraging, dealers are hopeful for better traction over the next 2-3 months.

Recommends adding Whirlpool of India Ltd., Havells and Crompton Greaves Consumer Electricals Ltd. shares

Basudeb Banerjee, an analyst at Ambit Capital Pvt.

The best case scenario for automobiles is for demand to remain flattish on a year-on-year basis as last festival season was bad for demand. Things have gotten worse since then.

Investors should avoid commercial vehicles and producers of lower-cost two wheelers, which face a bigger inventory pileup.

Recommends selling Hero MotoCorp Ltd., Ashok Leyland Ltd. and Tata Motors shares, buying Eicher Motors Ltd., Bajaj Auto Ltd. and Maruti Suzuki India Ltd.

Shirish Pardeshi, an analyst at Centrum Broking Ltd.

Demand is there, it’s only the size of the wallet that’s come down. In difficult times, people don’t stop buying the product. If someone was buying a large pack before, maybe they’ll buy a small pack now.

In the festive season people tend to forget the bad times.

Recommends buying shares in Dabur, Britannia, and Hindustan Unilever and Bajaj Consumer Care Ltd., on improving consumer sentiment, helped by a good monsoon that should support demand from rural areas, selling shares in Colgate-Palmolive

Maruti Suzuki slashes ex-showroom price of Baleno RS by Rs 100,000

The country's largest carmaker Maruti Suzuki India (MSI) on Friday said it has reduced the price of its performance hatchback Baleno RS by Rs 1 lakh.

Earlier this week, the company had reduced prices of select models by Rs 5,000 (on ex-showroom prices). These included all variants of Alto 800, Alto K10, Swift Diesel, Celerio, Baleno Diesel, Ignis, Dzire Diesel, Tour S Diesel, Vitara Brezza and S-Cross, MSI said in a statement.

These models are priced in the range of Rs 2.93 lakh and Rs 11.49 lakh.

In a regulatory filing, MSI said that along with the above reduction, it has also reduced the ex-showroom price of Baleno RS by Rs 1 lakh.

The model now starts at a price of Rs 7,88,913 (ex-showroom Delhi).

MSI had positioned the Baleno RS as a 'high-performance' hatchback powered by a 1.0 litre boosterjet petrol engine, which delivers 20 per cent more power than a naturally aspirated 1.2 litre petrol engine.

Maruti cuts prices by Rs 5,000 on select cars to boost festive demand

Maruti Suzuki, the leading automaker in the country, on Wednesday said it had slashed prices by up to Rs 5,000.

This move will boost demand in the festive season when most cars are sold, it said.

The lower prices will be effective immediately on models such as Alto 800, Alto K10, Swift (diesel), Celerio, Baleno (diesel), Ignis, Dzire (diesel), Tour S (diesel), Vitara Brezza and S-Cross.

Maruti has been offering benefits of up to Rs 10,000 since the beginning of September. The new reduction will be over and above that. Analysts said the price cut would wipe out gains to the automaker’s bottom line from the reduction in corporation taxes.

“Owing to the reduction in the tax rate, we had estimated a benefit of 5-6 per cent in the company’s profit after tax. This is likely to be wiped out now,” said Bharat Giani, analyst at Sharekhan. He added that the price cut was unlikely to boost demand.

R C Bhargava, chairman, Maruti Suzuki India, said, “The money that would have been left over because of the tax cut will now be utilised to meet the reduction in prices.”

Finance Minister Nirmala Sitharaman had last Friday slashed corporation taxes from 30 per cent to effectively 25.7 per cent.

Bhargava said he was hopeful the price cut would increase sales. “But it is difficult to say how much the sales will rise,” he said, adding: “Overall sentiments and stock markets have improved. The scenario looks rosier than before, but only time will tell whether it will translate into sales.”

Auto sales in India have been on a decline for over a year amid tepid economic growth and liquidity issues facing non-banking financial companies. In August, private vehicle (PV) sales touched a 22-year low.

Maruti is the first PV maker to have announced a price cut. Other carmakers said that while they had not cut prices, they were passing on benefits of the tax rate cut to buyers.

Vikas Jain, national sales head at Hyundai Motor India, said the company was passing on benefits from September 21, a day after clarity was provided on the goods and services taxes. The GST Council did not cut taxes on cars despite demand from industry.

Instead of paring prices, the Korean carmaker has been topping up on-going consumer offers. Total benefits for buyers have gone up to Rs 110,000 from Rs 95,000 earlier.

Jain claimed this had improved demand. “Bookings have soared by up to 50 per cent on some models,” he said, adding that many people were hoping for a GST cut before buying a car, but since that did not happen, they have started making purchases anyway.

Analysts feel the price cut was a temporary measure and Maruti was unlikely to hold on to it for very long. This was more so because the company had stretched itself with offers for buyers.

“Once Maruti gets back pricing power, which is weak at the moment, the carmaker might get back to previous levels. There is hardly going to be any impact on earning right away,” said Mitul Shah, vice president, research, at Reliance Securities.

Most carmakers have launched aggressive schemes to attract buyers. Their effect will be evident only next month.

Spokespersons at Tata Motors and Mahindra said they are yet to take a call on cutting prices. A Honda Cars India spokesperson said it had no plans to do so.

Auto major Maruti Suzuki slashes prices of select car models by Rs 5000

The country's largest car maker Maruti Suzuki India on Wednesday reduced the prices of select models by Rs 5,000 (on ex-showroom prices).

These models include all variants of Alto 800, Alto K10, Swift Diesel, Celerio, Baleno Diesel, Ignis, Dzire Diesel, Tour S Diesel, Vitara Brezza and S-Cross, MSI said in a statement.

These models are priced in the range of Rs 2.93 lakh and Rs 11.49 lakh.

The new prices will be applicable from today across the country.

This reduction of price will be over and above the current promotional offers for the company's vehicle range, it added.

The company said it is optimistic that the price reduction will bring down the cost of acquisition, especially for the entry-level customers. "This announcement around the festive season will help boost customer sentiment and revive the market to create demand," MSI said.

The company's price reduction comes days after the government cut corporate tax last week with an aim to help industry overcome slowdown.

Maruti Suzuki blames increase in ownership cost for declining car sales

The country’s largest carmaker Maruti Suzuki has blamed increase in ownership cost as the biggest reason for the slowdown in car sales. Along with that, a tight liquidity situation because of the stringent lending norms of banks and confusion over BS-VI vehicles have made life tougher for automakers.

This view comes in the backdrop of Finance Minister Nirmala Sitharaman’s comment that a change in the ownership pattern of cars from owned vehicles to cab aggregators such as Ola and Uber is the reason why car sales are falling. The auto industry is clamouring for a cut in goods and services tax (GST) for reviving demand.

“While we witnessed a growth of almost 26 per cent in the first four months last year, by the end of the year it had fallen to around 3 per cent. By April, there was no scope of sending any new vehicle to the dealers as the pipeline of inventory was already choked. I think the primary reason for this is the increase in ownership cost of a car,” said Shashank Srivastava, executive director, marketing and sales, Maruti.

Srivastava added that the hike in road tax, along with increased cost of manufacturing, to adhere to the BSVI norms, resulted in increase in on-road prices by an average 14-15 per cent.

“In some states, where road tax increase was higher, the on-road price has gone up by more than 20 per cent. This has primarily impacted the entry-level segment which is very price conscious. A 1 per cent hike in price also impacts sales,” he said.

As the ownership cost went up, lending by banks also became stringent as after the IL&FS crisis, banks became wary about disbursal.

Speedbreaker

Liquidity crunch, confusion over BS-VI vehicles were the key pain points

Automaker says hike in road tax, higher manufacturing cost resulted in 14-15% increase in on-road prices

Maruti not to undetake fire sale to clear BS-IV stock

Domestic vehicle sales fell 23.55% year-on-year to 1,821,490 units in August 2019

“We are talking to banks to treat customers with good payment record differently and not ask for a high collateral. We have succeeded in some cases,” Srivastava said.

According to the Society of Indian Automobile Manufacturers (SIAM), domestic vehicle sales in August declined by 23.55 per cent to 18,21,490 units from 23,82,436 units in the same month last year. From April to August period, sales have fallen by 15.89 per cent to 97,32,040 units from 1,15,70,401 units in the year-ago period, SIAM had said. Maruti is trying to tide over the crisis by offering heavy discounts on its vehicles in popular models like Baleno, Ciaz and Swift.

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For its Nexa models, Maruti has offered a gallery of offers. Except for the recently-launched XL6, there are a variety of schemes in the form of exchange offers, corporate offers and free extended warranty.

“The biggest factor to buy a car is positive sentiment. Since the sentiment is negative, we are trying to create a positive sentiment and stimulate the market through offers and discounts. I think this is the best time to buy a car,” Srivastava said.

He said Maruti will roll out the offers very soon and not undertake a fire sale to clear BSIV stock close to the BSVI norms implementation.

“We have already launched seven of our most popular models, which are BSVI-compliant. So, we are already in the process of clearing the BSIV stock. We may not have a stock to do a fire sale close to the implementation date of April 2020 (for BSVI),” Srivastava said.

Maruti asks spare parts industry to make electronic components in India

The country's largest carmaker Maruti Suzuki India on Friday asked the components makers to start manufacturing vehicle electronics and certain key parts in India in order to cut imports of such articles.

The local manufacturing of such parts would not only help Maruti Suzuki India (MSI), but also support the government's Make in India initiative, MSI MD and CEO Kenichi Ayukawa said while speaking at the ACMA annual convention here.

"I have a challenge and an invitation to offer to you (components industry). The MSI car is over 90 per cent local, component-wise. But some key parts and electronics are areas where we still need to import. But we want to Make-in-India," Ayukawa said.

If anybody can make electronic components and some key parts in India with quality and reliability, it will not only help MSI, but the entire Indian automobile industry, he added.

Ayukawa said the best opportunity to win in the future lies in developing in-house research and development (R&D) capability.

"If India has to be competitive in the world of tomorrow, my message is - start developing in-house R&D capability... (which) is a very long drawn process and the results come slowly. We have to be patient and stay committed," he added.

On government policy, Ayukawa said that if the government sets targets on the end-goals and allows freedom to the industry players to choose the technology, it would be best suited to achieve the end-goals.

"Such technology-agnostic approach will give the freedom of technology-choice, while keeping focus on the target," he added.

Ayukawa also emphasised on the virtues of quality manufacturing of auto components.

Maruti to stop production at Gurugram, Manesar plants for two days

Maruti Suzuki on Wednesday said the company has decided to shut down operations for two days at its Haryana plants.

The company will observe "no production day" on September 7 and 9 at Gurugram and Manesar plants, the company said in a statement.

The auto industry in India has been reeling under a severe slowdown in the last few months. Along with other auto makers in India, Maruti has been cutting output in the recent months.

In August, the company reduced its production by 33.99 per cent, making it the seventh straight month that the country's largest car maker reduced its output.

The company produced a total of 1,11,370 units in August as against 1,68,725 units in the year-ago month, Maruti had said in a filing to the BSE.

Facing slowdown, and inventory glut, Maruti cuts 3,000 contract jobs

Maruti Suzuki India Ltd Chairman R C Bhargava said on Tuesday the company had not renewed the contracts of 3,000 temporary employees, as the automaker battled rising inventory amid a slowdown in demand. 

Safety norms and higher taxes have "added substantially" to the cost of cars, affecting their affordability, Bhargava told shareholders at the company's annual general meeting.

With India's auto sales declining for the ninth straight month in July, more automotive manufacturers are laying off workers and temporarily halting production to keep costs in check, Reuters reported on Saturday. 

 

The company is on track to meet the country's new emission norms, adding that the company will move towards manufacturing compressed natural gas (CNG) and hybrid cars.

Maruti plans to increase CNG vehicles by 50% this year, Bhargava said.