Maruti’s FY22 net profit drops 11 percent on higher inputs cost

Maruti  reported an 11 percent year-on-year (YoY) decline in its net profit to Rs 3,766 crore, in FY22  as a result of higher input prices of commodities such as steel, aluminium and precious metals which the company said was unprecedented in the fiscal.

In a statement, Maruti said, “The company was forced to increase prices of vehicles to partially offset this impact. Maruti continues to work on cost reduction efforts to minimise impact on customers.”

Although net sales increased to Rs 83,798 crore, (FY21: 66,562 / +26%), the net profit declined as the entire cost impact was not passed on to the customers.

In an earlier interaction with Autocar Professional, Shashank Srivastava, senior ED, Marketing & Sales, said, “Maruti has not passed the entire impact of commodity price increase to our customers as we are very conscious of the fact that we should not compromise on the demand. We assess the balance between profitability and demand almost on a daily basis, and take the right approach, by focusing on long-term demand and profitability.”

Sales performance
Maruti sold 1,414,277 units in the local market in the last fiscal, a 3.9 percent over FY21. For the last quarter of FY22, it sold  488,830 vehicles, lower by 0.7 percent as compared to the year-earlier period. In the last quarter, domestic sales stood at 420,376 units, a decline of 8 percent over that in Q4 FY21. The sales in the export market were at 68,454 units which is the highest ever in any quarter.

While Maruti’s  order book for FY22 closed at 268,000 units, an uncertain supply chain situation due to the Ukraine war and the impact of China’s stringent Covid policy has pushed pending orders to  325,000 units till end-April 2022. The company recorded its highest ever exports of 238,376 units in FY 2021-22 compared to 96,139 units in FY2020-21, about 62 percent higher than exports in any financial year so far.

Maruti has gone on the record to say that chip availability to continue remain challenging in Q1 of FY23, which will likely impact deliveries of some models such as the recently launched new Baleno and XL6.

With its overall market share dropping to 43 percent in FY22, Maruti has also seen demand shift from the lower segments to the upper end of the market, and is mindful of a need to tweak its product strategy to cater to those segments. “We will need to adjust our investments accordingly to regain the 50 percent market share, “ said chairman RC Bhargava during a virtual press meet on April 29.

With only two SUV products in its portfolio, Maruti expects sales of this segment to account for just 10 percent of its total volumes. Maruti and Toyota are jointly developing a midsized SUV  to strengthen its presence in one of the fastest growing segments in the Indian passenger vehicle market.