Maruti Suzuki adjusts production as it witnesses low demand
Maruti Suzuki, India’s largest carmaker, has decided to reduce its production in response to slower-than-expected demand in the Indian passenger vehicle market during the first quarter of fiscal 2024-25. This adjustment comes as dealer inventories have risen to worrying levels, according to a recent update from Suzuki Motor Corporation (SMC), the majority shareholder of MSIL.
The slowdown in sales has sparked broader concerns within the Indian auto sector. The Federation of Automobile Dealers Associations (FADA) reported that its members are currently holding on to around 730,000 unsold vehicles, which is enough to cover more than two months of sales. This figure contrasts with estimates from the Society of Indian Automobile Manufacturers (SIAM), which suggests the inventory may be closer to 400,000 units.
SMC said the Indian automotive market typically experiences a slower first quarter compared to the rest of the year. However, this year’s decline in demand was more pronounced, partly due to factors such as the upcoming Lok Sabha elections and adverse weather conditions, including heavy rains and heat waves. To cope with the rising inventories, Maruti Suzuki is adjusting its production levels and monitoring demand trends closely, especially with the onset of the festival season, which is expected to generate higher demand.
During the first quarter of 2024-25, Maruti Suzuki’s production saw a 7.4% year-on-year increase to 4,96,000 units. However, sales increased by just 1.2% to 4,27,000 units. Despite the production cut, MSIL maintains a dominant 40% share in the Indian car market.
SMC remains cautiously optimistic about the overall growth outlook for the year, projecting a 2-3% year-on-year increase in car sales, supported by potential government measures in the second half of the fiscal year. Retail sales showed some improvement in July compared to the April-June period, with a modest 3% year-on-year increase from April to July. However, the company acknowledges the need for continued inventory adjustments and emphasizes the importance of stimulating demand during the upcoming festival season, which begins in late August and runs through Diwali in October.
Maruti Suzuki’s senior executive director, marketing and sales, Partho Banerjee said the company currently has 38 days’ inventory and does not plan to reduce it further as it is considered sufficient to meet the expected demand during the festival season, which includes major events like Onam, Ganesh Chaturthi, Navratri and Diwali.
Earlier this year, SMC had forecast 2% year-on-year growth in Indian car sales, with expectations that Maruti Suzuki would outperform the broader market. Despite the current uncertainties, SMC reiterated its full-year outlook, given the potential for demand fluctuations in the coming months.
In financial terms, SMC’s revenue from its car sales in India in Q1 FY2024-25 is expected to reach $3.86 billion, accounting for 42.7% of its global revenue. The company’s net profit saw a significant 56% year-on-year increase to $0.78 billion, largely driven by strong performance in markets such as Japan and Europe.