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Business News/ Companies / Company Results/  SUV sales drive up Maruti’s Dec quarter profit by 33%

SUV sales drive up Maruti’s Dec quarter profit by 33%

Maruti Suzuki is benefiting from rising SUV sales, which are offsetting weak small-car sales.

 The average selling price of vehicles increased by 6% due to higher sales of pricier SUVs. (Photo: Reuters)Premium
The average selling price of vehicles increased by 6% due to higher sales of pricier SUVs. (Photo: Reuters)

Rising SUV (sport utility vehicles) sales are helping Maruti Suzuki offset a continued weakness in its ‘bread and butter’ small-car segment, as aspirational customers increasingly look to upgrade to premium vehicles.

A 6% increase in the average selling price (ASP) of its vehicles, on account of a higher contribution of pricier SUVs to its total sales, helped the company offset the impact of deep discounts during the December quarter, a period of festivities during which firms typically cut prices to lure customers.

The Gurugram-based company reported a standalone net profit of 3,130 for the quarter ended December, a 33% year-on-year jump, driven by increased SUV sales even as small-car offtake remained subdued.

Maruti Suzuki sold 501,207 vehicles during the quarter, out of which 429,422 units were sold in the domestic market and 71,785 were exported, the highest-ever for any quarter.

The company’s standalone revenue from operations in Q3FY24 increased 14.68% to 33,308.7 crore from 29,044.3 crore a year earlier, benefiting from strong demand for its more expensive and profitable SUV segment, which consists of 7 models at present, including the mid-SUV Grand Vitara and the crossover Fronx, both of which have surpassed 1 lakh units each in cumulative sales, the company told stock exchanges on Wednesday.

The company said higher sales volume, cost reduction efforts, slightly favorable commodity prices, and higher non-operating incomes aided its revenue growth.

In the April-December period, Maruti Suzuki had an SUV segment share of nearly 21%, according to wholesale data compiled by the Society of Indian Automobile Manufacturers (SIAM).

The company told analysts that it had a “very healthy and low closing stock at the end of the quarter at less than 45,000 units", with dealerships prepared to receive new stock. “So we started the new year light and ready to receive many more cars in the dealerships", Rahul Bharti, chief investor relations officer, Maruti Suzuki, told analysts in a post-earnings conference call.

The company expects its Ebit margin, which improved to 9.9% versus 7.6% in the corresponding period last year, but declined 130 basis points sequentially, to get a boost from the recent price hikes taken by the company, favourable commodity prices, and lower discounts.

“Discounts were up in Q3FY24, so that impacted Ebit margins by about 70 basis points. Advertisement cost was up by about 30 basis points, so that there was a net negative about 210 basis points (quarter-on-quarter)... On the other hand, we gained somewhat on foreign exchange and royalty at about 30 basis points. So on the whole, sequentially, on Ebit, we had about 130 basis points fall from 11.2% in Q2 to 9.9% in this quarter", Bharti said.

The company is looking to double its production capacity to 4 million units by the turn of the decade, and is set to begin production of its maiden BEV (battery electric vehicle) for the Indian and export markets in this calendar year, Maruti Suzuki said. Maruti Suzuki’s first EV launch will be in the ‘upmarket SUV’ segment, positioned above the Grand Vitara mid-sized SUV, with a range of 550 kilometers and a 60 kilowatt hour battery capacity.

“So, of course, the range anxiety is something that we’ve taken care of extremely well. So it’s a high spec vehicle and we are hopeful that customers will receive it well", Bharti told investors.

According to auto industry body SIAM, while this financial year is likely to record 4.18-4.20 million units in passenger vehicle sales, the high base set in FY24 points to a more benign growth outlook of close to 4.3 million units in sales in FY25.

Read all Q3 Results here

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Alisha Sachdev
Alisha Sachdev reports on the auto and mobility sector, with a special focus on emerging clean mobility technologies.
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Published: 31 Jan 2024, 01:58 PM IST
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