Maruti and Hyundai may increase their market dominance amid current slowdown2 min read . Updated: 06 Jul 2020, 05:55 PM IST
- At the end of fiscal 2020, Maruti Suzuki and Hyundai Motor together accounted for 68% market share, which may increase more than 70% going ahead
MUMBAI: Strong financials, diverse product portfolio, and a wide sales network will likely help India’s leading car makers--Maruti Suzuki India Ltd and Hyundai Motor India Ltd--increase their market share in the coming quarters, according to senior industry executives.
Also, their competitors may find it difficult to withstand the hit to demand from the covid-19 pandemic and the ensuing lockdown.
At the end of fiscal 2020, Maruti Suzuki and Hyundai Motor together accounted for 68% market share, which may increase more than 70% in the aftermath of the pandemic, industry experts added.
Both the companies have raised production to almost 40% of pre-pandemic levels and plan to ramp up to 70-80% during July-August, having witnessed a reasonable recovery in retail sales, especially in smaller cities and rural markets, while most of their competitors continue to struggle with sales and production.
Maruti and Hyundai have the advantage of economies of scale and also have the ability to ramp up production faster to meet retail demand when compared to competitors.
"Both companies have started operating their second shifts of production considering the demand in the smaller towns and rural markets. None of the other car makers have such aggressive plans. Most of them have adopted wait-and-watch policy and production forecasts are also subdued," said a person aware of the developments, requesting anonymity.
Most automakers resumed production in May, and Maruti Suzuki's wholesale dispatches rose 270% month-on-month to 51,274 units in June. Hyundai's wholesale climbed to 21,320 units in June from 6,883 units in May.
Both companies, especially Maruti, are also likely to benefit from a shift in demand for small cars due in the backdrop of economic slowdown and increasing preference for personal mobility.
Mint, on 18 June, reported that Maruti Suzuki plans to increase monthly car production to more than 1 lakh vehicles from July on hopes that sales of affordable, entry-level hatchbacks will rebound thanks to a faster demand revival in semi-urban and rural markets. The New Delhi-based car maker is also likely to increase manufacturing of compact vehicles like Alto, Wagon R and Celerio.
Hyundai has also started a second shift of manufacturing to meet demand for its products like Grand i10 Nios (a hatchback), Venue (a compact SUV) and Creta (a mid size SUV).
According to Mitul Shah, vice-president, research, Reliance Securities, Maruti and Hyundai are better placed to deal with the current crisis because of their widespread network of dealers and diversified product portfolio.
“Most of the demand these days is coming from small towns and rural areas and presence in these geographies will keep these two companies ahead of the others. Shift of customer preference toward entry level cars will also work to their advantage," added Shah.
Only the leaders in different vehicle segments, like Maruti, Hyundai, Hero MotoCorp and Bajaj Auto have plans to quickly ramp up production to meet the retail demand which has recovered faster than expected.
In current circumstances, companies need to have the financial strength to support their dealers and build inventory to take advantage of the recovery in retail sales in small town and rural areas, according to Avik Chattopadhyay, founder, Expereal. Maruti and Hyundai are only two players who can do it efficiently.
"Sales of compact cars are likely to increase in non-metro and tier one cities in the coming months and car makers like Nissan, Renault and Tata Motors have the product portfolio but they don’t have that reach. Also some of them may have some financial constraints due to the current crisis," said Chattopadhyay.