Maruti Suzuki's RC Bhargava sounds sombre note for PVs next year, hints at stagnation | Mint

Maruti Suzuki chairman sounds sombre note for PVs next year, hints at stagnation

Cars parked at the Maruti Suzuki's plant at Manesar. (Photo: Reuters)
Cars parked at the Maruti Suzuki's plant at Manesar. (Photo: Reuters)


  • The company saw a surge in its net profit, standalone revenues as well as per-vehicle EBIT, and expects to touch 2 million vehicle sales in FY24 for the first time in its history

New Delhi: On the back of stellar, “best in history" results, Maruti Suzuki’s chairman R.C. Bhargava claimed the company would grow its volumes 10% by the end of FY24, nearly twice as much as its competitors in the passenger vehicle market, who expect to grow around 5.5% in this time. In the first half of FY24, Maruti Suzuki’s volumes were up 6.6%.

The Q2 results were indeed eye-popping for a company of its size. India’s largest passenger vehicle maker on Friday reported an 80% surge in its net profit to 3,716.5 crore for Q2 of FY24 compared to Q2 of FY23, which beat estimates of 3,040 crore from analysts polled by Bloomberg. Standalone Q2 revenues, at 37,062.1 crore, were up nearly 29% from 29,930.8 crore YoY. Its per vehicle EBIT (earnings before interests and taxes) also improved 83% year-on-year to a record-high of 72,277 during this period. 

"Maruti Suzuki's Q2FY24 results are encouraging with EBIT/ vehicle scaling life highs amid improving mix, lower commodity prices and increasing volumes," said Jay Kale, senior vice president at Elara Capital. “We remain watchful of the demand scenario for the industry."

The carmaker's performance was helped by higher sales thanks to easing semi-conductor supplies, and an improvement in margins due to its cost-reduction programs and softening raw material prices. Bhargava also said that Maruti Suzuki has been able to significantly reduce waiting periods for its products, thereby bringing down open orders from nearly 400,000 units to 215,000 units by the end of October.

"Most of the issues coming in the way of the company performing to its full potential earlier are past us," Bhargava said at a post-earnings press conference. “One manifestation of this is the fact that our quarterly results are the best we've had in our history so far. Now that we've crossed 1 million units in sales in the first half of the year (it sold 1,050,085 vehicles from April to September), the probability of doing 2 million in production is very, very high now", Bhargava said.

Of the 2 million target, the company aims to sell close to 1.8 million vehicles in the domestic market in FY24. Exports are expected to bring in another 2.59 lakh units, similar to last year, owing to a lack of production capacity to significantly grow exports. The carmaker is currently in the process of acquiring the Suzuki Motor Gujarat (SMG) manufacturing unit from Suzuki Motor Corporation (SMC) and is seeking minority shareholders' votes to approve the proposal.

Bhargava, however, sounded a sombre note when he said that the company was merely making up for what it had lost in the past, and it would still be below its target of 50% market share in passenger vehicles (currently it has 42.3% share). He cautioned that after stellar growth over the past two years, including the ongoing fiscal, growth projections for the Indian passenger vehicle market for FY25 are virtually at stagnation levels, which he attributed to degrowth in the small car market.

"India needs that segment to grow," he said, adding that he was still convinced that with 180 million two-wheeler users in India, demand for entry-level small cars has to come back. “The affordability factor is going to gradually get eroded, and in the next 2-3 years, people once again will be able to afford small cars. Sustained, high levels of growth in India are very unlikely without small car growth."

Next fiscal, too, Bhargava expects the company would continue to outperform the industry. "We don't have a figure yet for what we expect next year, but unlike the overall industry which thinks that next year there will be flat growth, we expect positive growth," he told Mint.

On the fuel mix front, Bhargava said he expects hybrid vehicles to play a larger role in India's decarbonization journey compared to electric vehicles, pointing to a narrowing gap between the number of electric vehicles and hybrid vehicles sold in the country, despite India's taxation regime favouring EVs in the form of GST concessions and several state government incentives.

Shares of Maruti Suzuki rose to touch a life-time high of 10,803.5 apiece on the Bombay Stock Exchange (BSE) on Friday in response to the company's robust financial performance, before settling 1.2% higher at 10,552.9 on a day the broader markets index, the BSE Sensex, had climbed 1%.


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