Passenger vehicle market leader Maruti Suzuki India seems to have a problem of plenty on its hands. The company claims that its pending order book currently stands at about 215,000 units on the back of better-than-expected demand during the post-festive season.
While this could be seen as a positive for the company, the carmaker will have to speedily ramp up production as its current network inventory is believed to be just around 21,000 units with very less factory inventory. Otherwise, its customers will be faced with a long waiting period.
In a recent investor call, the company detailed a breakup of the sales pattern in Q3 FY2020. It is understood that the share of first-time buyers increased from 43 percent to 48-49 percent compared to Q3 FY2019. However, the replacement buyer share declined to 19 percent from about 26 percent for the same period; Maruti Suzuki said the average age of pre-owned cars has gone up to 9.2 years from 8 years earlier.
With demand for passenger cars still far below the peak by about 30 percent despite recovery since the past five months (month on month), the company management is cautious about passing on the increasing costs as it may lead to dampening of market demand. However, on January 19, the carmaker hiked ex-showroom prices of its models across the entire product portfolio. The revised prices are by 1 percent and 6 percent and range between Rs 5,000 to a maximum increase of Rs 34,000, depending upon the vehicle model.
Higher sales drive up Maruti Suzuki’s Q3 performance
Meanwhile, Maruti Suzuki India posted a sequential as well as year-on-year improvement in its Q3 financial performance. The Q3 FY2021 net sales was up 13.2 percent YoY at Rs 22,236.70 crore (Q3 FY2020 net sales: Rs 19,649.10 crore) and Q3 net profit was up 24.1 percent at Rs 1941.4 crore (Q3 FY2020 PAT: Rs 1564.8 crore) on account of higher sales volume.
The company sold a total of 495,897 vehicles during Q3, up 13.4 percent compared to the same period previous year. Its sales in the domestic market stood at 467,369 units in Q3 FY2021, up 13 percent from Q3FY2020. Exports were at 28,528 units, higher by 20.6 percent compared to Q3FY2020.
Higher non-operating income also boosted the quarterly performance as the Q3 operating profit grew 19.3 percent year-on-year at Rs 1484.80 crore. The cost reduction initiatives undertaken by the company were partially offset by increase in commodity prices and adverse foreign exchange movement.
For the 9 months in FY2021, Maruti Suzuki’s total sale of 965,626 vehicles is down 18 percent compared to the same period previous year. However, this also includes a washout in April when sales were impacted due to the lockdown to contain the spread of Covid-19 in the country.