Maruti, Hyundai may see increase in market share2 min read . Updated: 07 Jul 2020, 07:20 AM IST
- Most competitors are finding it difficult to withstand the adverse impact of covid-19
- The two companies have diverse product portfolios, strong financials and good sales networks
MUMBAI : India’s Maruti Suzuki India Ltd and Hyundai Motor India Ltd, the country’s top two carmakers, are expected to further grow their market shares in the coming quarters with most competitors finding it difficult to withstand the adverse impact of the coronavirus pandemic on their operations.
Strong financials, diverse product portfolios and robust sales networks will help Maruti Suzuki and Hyundai widen the gap with their competitors, said two senior industry executives.
Both automakers have increased production to almost 40% of pre-covid levels despite disruptions, and plan to ramp up to 70-80% in July and August. They have also witnessed reasonable recovery in retail sales, especially in smaller cities and rural markets, while the others are still struggling on both fronts.
As on 31 March, Maruti and Hyundai commanded a combined 68% market share, and are likely to breach the 70% mark going ahead, said the first industry executive mentioned above.
According to the second person mentioned above, Maruti and Hyundai have the advantage of economies of scale, and can ramp up production faster to meet any potential increase in retail demand compared to their rivals. “Both companies have gradually started operating their second shifts of production, considering the demand in the smaller towns and rural markets. None of the other carmakers have such aggressive plans. Most of them have adopted a wait-and-watch policy, and production forecasts are also subdued," the person said.
Maruti Suzuki increased wholesales, or factory dispatches, to 51,274 vehicles in June, from 13,865 units in May. Sales at Hyundai also surged to 21,320 vehicles in June, from 6,883 units in May.
Both companies, especially Maruti, are also likely to benefit from a shift in demand towards small cars because of a slowing economy and increasing preference for personal mobility on fears of contracting infection.
On 18 June, Mint reported that Maruti was planning to boost monthly car production to more than 100,000 units from July, on hopes that sales of affordable, entry-level hatchbacks will rebound following the faster revival in demand from semi-urban and rural markets. The company is also likely to expand output of compact vehicles Alto, WagonR and Celerio.
Meanwhile, Hyundai has started its second shift to meet demand for its products such as Grand i10 Nios (hatchback), Venue (compact SUV) and Creta (mid-size SUV).
Mitul Shah, vice-president, research, Reliance Securities, said Maruti and Hyundai are better placed to deal with the current crisis because of their widespread dealer network 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."
In fact, leaders in different vehicle segments, including Maruti, Hyundai, Hero MotoCorp and Bajaj Auto, are quickly ramping up production to meet the retail demand, which is recovering at a faster pace than expected.
According to Avik Chattopadhyay, co-founder, Expereal, under the 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 towns and rural areas. Maruti and Hyundai are the only two players who can do it efficiently. “Sales of compact cars are likely to increase in non-metro and tier I cities and carmakers such as 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," Chattopadhyay said.