Maruti Suzuki expects the Indian passenger vehicle industry to grow by around 10% in the current financial year, with GST 2.0, lower interest rates and improving affordability driving a sharp recovery in entry-level car demand. However, the company is entering the key festive season with just 16 days of network inventory, below the 30-day level it considers healthy.
Speaking at a media roundtable on the sidelines of the SIAM annual convention, Partho Banerjee, Senior Executive Officer, Marketing & Sales, Maruti Suzuki India, said the auto industry is currently averaging around 4.5 lakh units a month and is expected to reach 5.3-5.4 million units for the full financial year, compared with around 4.8 million units last year. “My take is at least 10% growth of the industry should happen in the FY year,” Banerjee said.
The strongest recovery is currently being seen at the lower end of the market. Banerjee said vehicles falling under the 18% GST slab are growing at more than 30%, while the 40% segment is also growing by around 20%.
Small Cars Make a Comeback
Maruti is seeing a particularly strong revival in small-car demand, with the segment growing around 83% on a low base from last year. Banerjee attributed the recovery to the reduction in GST, tax relief under the Finance Bill and lower interest rates. “That gave some more money in the wallet of the customers. Third was the reduction in the repo rates by 100 basis points. That reduced the EMI,” he said. The recovery has taken Maruti's entry-level models back to volumes last seen several years ago. The company sold more than 21,000 WagonR cars last month, while its Alto sales were around 10,000 units, according to Banerjee. He expects the momentum to sustain through the festive period, although he cautioned that growth rates will naturally moderate as the base gets higher.
Maruti Enters Festive Season With Just 16 Days of Stock
Despite strong demand, Maruti is entering the festive season with inventory below its preferred level. Banerjee said the company's network stock currently stands at around 16 days, compared with 13-14 days at the beginning of the financial year. “I am a little unhappy only for one reason, it's my stocks. I have got very less stocks around 16 days. I would have been more happy if I had a stock of one month,” Banerjee said. He added that the unexpectedly strong response to new products has stretched production capacity. The new Brezza has already crossed 60,000 bookings, around 35-36 days after launch. Maruti has two production lines with a combined capacity of around 2.5 lakh units, and the company expects to reach full capacity over the next three to four months.
Maruti Ramps Up EV Production Gradually
Maruti's EV production is also being ramped up gradually, with Banerjee stressing that the company's automated production lines cannot immediately operate at full capacity. “We have got a flexible line. The automation is quite a lot. It takes time to stabilize,” he said. While the company had indicated production of around 2,000 EVs a month initially, Banerjee said the ramp-up will take time as the manufacturing lines stabilise.
Despite the rapid growth in electric vehicles, Maruti expects EVs to account for around 16-17% of the Indian auto industry by 2030.
First-Time Buyers Rise 10%
Another significant indicator of improving affordability is the rise in first-time car buyers. Banerjee said Maruti has seen a 10% increase in the share of first-time buyers year-on-year, with their contribution now reaching 54%. “If the motorization has to increase, the car penetration has to go up. The bottom of the pyramid, the two-wheeler people, has to upgrade to a four-wheeler. So they cannot all leapfrog to a car costing 15 lakhs or 20 lakhs,” he said. Maruti has also seen rural penetration rise to 53%, indicating that the recovery is not limited to urban markets.