BackMaruti doubles Q3 net as sales, margins climb
The shift to bigger cars helped carmaker better average sales price in Q3Maruti Suzuki sold 465,911 vehicles during the quarter, with domestic sales at 403,929 units
PremiumNew Delhi: Maruti Suzuki India Ltd, the country’s largest car manufacturer, beat Street estimates to more than double its net profit in the quarter ended 31 December to ₹2,351 crore, compared with ₹1,011 crore a year earlier.
Shares of the carmaker surged nearly 3.3% to close at ₹8,698.6 on the Bombay Stock Exchange after the announcement. A Bloomberg poll of analysts had estimated Maruti Suzuki’s net profit for the third quarter at ₹1,850 crore.
Improved semiconductor supplies, along with sustained demand for passenger vehicles, especially SUV sales, drove up revenue by 25% to ₹27,849.2 crore. Maruti Suzuki sold 465,911 vehicles during the quarter, with domestic sales at 403,929 units and exports at 61,982.
However, a shortage of electronic components impacted production by about 46,000 vehicles in Q3. While Maruti Suzuki said chip availability has been improving, the outlook for supplies is uncertain and remains a bottleneck.
Maruti Suzuki’s pending customer orders stood at about 363,000 vehicles at the end of the quarter, including 119,000 orders for its new models. It said the bulk of its pending orders is for high-end products such as the Grand Vitara, Ertiga and Brezza.
Maruti Suzuki, a subsidiary of Japan’s Suzuki Motor Corp., is aiming for leadership in the SUV segment with the launch of its compact SUV Fronx and off-roader Jimny, which were displayed at the Auto Expo. Bookings are open for both models. The company, which commands nearly 41% share of the passenger vehicles market, is down from its peak 52% levels, is betting on its line-up of bigger cars to fetch it the pole position in the SUV market by FY24.
More Maruti Suzuki customers are buying bigger cars in its portfolio, reflecting the pain in the entry-level hatchback market, and highlighting the company’s efforts to drive premiumization in its product mix. The company’s average selling price grew 7.8% from the September quarter. It also improved its margins by 9.8% on a quarterly basis, as earnings per vehicle rose to ₹45,600 from ₹39,600 in Q2FY23.
Softening commodity prices and favourable foreign exchange rates further helped the company expand its margins, offsetting high discount costs at ₹18,291 on an average in the quarter gone by.
“Discounts were higher in Q3 compared with the previous quarters as retail was much higher than wholesales. Average discount in Q3 was ₹18,291 and ₹13,840 in Q2. Demand for newer models and bigger cars is significantly higher, so the mix is changing towards bigger cars. There is not much pull towards hatchbacks. As a result, on account of price differences between our entry-level cars and models like, say Ertiga, much higher, average sales prices will keep going up, but profits will depend on the margins we are able to make on each of the models," Ajay Seth, chief financial officer, Maruti Suzuki, told analysts at a post-earnings conference call.
The Fronx and Jimny will roll out in the next couple of months. A company executive said Jimny’s bookings crossed 5,000 within a week. For other models, it closed Q3 with network stocks of just five days.
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