Don't expect India to grow in double digits like China, Indian car market to grow by 6% by FY31, says RC Bhargava
Small cars to grow by 2%, SUVs to grow faster, Maruti to restructure its production accordingly.
RC Bhargava, the Chairman of Maruti Suzuki says he does not expect the Indian market to grow in double digits like China, but anticipates it will grow at a much slower rate of 6% till FY31.
Yet, Maruti Suzuki, on its part, will be looking at almost doubling the capacity to 4 million units in the next eight years, and Bhargava said the company will grow faster than the market and the exports from India are also likely to triple in the next eight years to over 7.5 to 8 lakh units.
One of the key drivers of the Indian auto market growing in double digits was an influx of first-time buyers transitioning from two-wheelers to small cars. With the price gap between two-wheelers and entry cars widening dramatically, the compounded annual growth rate for the country has been in the single digits over the last decade.
Small cars to grow by merely 2%
Bhargava told shareholders that since there are no prospects for demand for the smaller entry-level car market recovering to the growth rates of the past, Maruti Suzuki is restructuring its production facilities to conform to the realities.
“What we are projecting is for the future. Despite the slowdown in this category, hatchbacks and small cars will remain a very important part of our total portfolio. The rate of growth of these cars is expected to be less than 2% a year but the industry volume is almost a million cars a year with MSIL having a share of about 70%. Accordingly, your Company intends to do whatever is necessary to meet customer needs in this segment in the best possible manner," he added.
To be on the right track, Maruti Suzuki has made a course correction by adding a string of new SUVs in the last few years in the price bracket of Rs 8 lakh to Rs 25 lakh and is now vying for leadership position in the SUV segment.
Bhargava said "With the active support of Suzuki Japan, Maruti has been working to strengthen its portfolio of products to meet the changing market situation. We now have four very well-accepted SUVs in the market and are on our way to assume leadership in this segment. We will gradually keep increasing our market share that has declined in the last 2-3 years."
He said that apart from rising domestic demand, the prospects for exports are also expected to continue to improve and Maruti Suzuki expects the demand for exports is projected at 7,50,000-8,00,000 cars by FY 2030-31. And these domestic plus export requirements have made it necessary for the company to add another 2 million units to the manufacturing capacity.
"Work is progressing at the first site in Kharkhoda, Haryana, and it is expected that the first plant of 250,000 capacity will start production in the first half of 2025. Thereafter, one similar plant will be added each year to reach a capacity of one million. At the same time, we are in the process of selecting a second site for adding another one million capacity by FY 2030-31," he added.
Doubling of capacity through internal resources
The Chairman of Maruti Suzuki informed that the company will be investing through its internal resources to double this capacity.
In his address to shareholders in the 42nd annual report of Maruti Suzuki, Bhargava explained that one of the very valuable lessons he learned from Osamu San - the former Chairman of Suzuki Motor Corporation was that the magic mantra for growth is to maximise earnings and to reinvest in growth.
"Your Company’s frugal style of management and financial policies, practiced for 40 years, have created the ability to withstand any kind of shocks from the market and make investments as necessary. We are planning to increase our capacity by 2 million cars a year by FY 2030-31. The required investments will all come from internal resources," he added.
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