Chip woes cost Maruti Suzuki 116,000 units in Q2, profit down 65%

Passenger vehicle market leader Maruti Suzuki could not produce an estimated 116,000 vehicles during the quarter ended September 2021 (Q2 FY2022: July-September) due to electronics components shortage. As a result, the carmaker’s output in September was down by nearly 60 percent, this at a time when the festive season calls for speedy supplies to showrooms across the country.

This sharply reduced output was restricted to domestic market models. The company's order-books during the same period stood at upwards of 200,000 vehicles. However, Maruti Suzuki management expects production to be ramped up in November 2021, helping to somewhat ease the situation going forward.

Talking with the reporters during the post-result press conference today, RC Bhargava, Chairman, Maruti Suzuki said, “The developments have been unprecedented this year,” while referring to the spike in commodity prices and semiconductor shortages among other headwinds facing India Auto Inc.

Maruti Suzuki, which sells one out of every two cars in India, was able to sell 379,541 units during Q2 FY2022, down 3.4% (Q2 FY2021: 393,130). Of this total, domestic market sales comprised 320,133 units, down 13.6% (Q2 FY2021: 393,130). Exports clocked 59,408 units, up 164% (Q2 FY2021: 22,511) and the highest ever in any quarter for the Gurugram-headquartered company. “It looks like this kind of exports is sustainable,” added Bhargava, emphasising that support from Toyota dealerships came very handy in the rising exports tally.

Net profit plunges 65% in Q2 FY2022 due to commodity price increases
In monetary terms, Maruti's net sales during Q2 FY2022 stood at Rs 19,279 crore compared to net sales of Rs 17,689 crore in Q2 FY2021, up 9% year on year. “This quarter was also marked by an unprecedented increase in the prices of commodities like steel, aluminium and precious metals within a span of one year,” Maruti said in a regulatory filing. The company said that it made maximum efforts to absorb input cost increases offsetting them through cost reduction and passed on minimum impact to customers by way of car price increase. Due to this, the company’s net profit plunged 65% to Rs 475 crore in Q2 FY2022 (Q2 FY2021: Rs 1,371 crore_.

The company management added that it is also working on electric vehicles and flex-engines for ethanol-blended petrol.