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Maruti adjusts production to reduce dealer stock amid slower sales: Suzuki | Company News

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Maruti Suzuki | Photo by Milan Masnikosa on Pexels

Maruti Suzuki | Photo by Milan Masnikosa on Pexels


Maruti Suzuki India Ltd (MSIL), India’s largest carmaker, is “adjusting” its production to ease dealer inventories, following “slower than expected” demand for passenger vehicles in the Indian market in the first quarter of 2024-25, said its majority shareholder Suzuki Motor Corporation (SMC).


“We are currently adjusting production to reduce market stock and are closely monitoring demand trends. India will be in a critical period with the upcoming estival season; so we will closely monitor demand trends,” SMC told analysts in a conference call on August 6, a transcript of which was reviewed by Business Standard on Tuesday.

 


The slowdown in car sales has triggered concerns across the Indian auto industry, with dealer stockpiles reaching alarming levels. The Federation of Automobile Dealers Associations (Fada) has written two letters to the Society of Indian Automobile Manufacturers (Siam) in the past few months on this matter.

 

According to Fada, its members are sitting on approximately 730,000 unsold vehicles — enough to cover more than two months of sales. In contrast, the Society of Indian Automobile Manufacturers estimates the number closer to 400,000 units. 

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“The Indian market is usually a bit slower in the first quarter than the rest of the year, but this year (demand) has been slower than expected, especially due to the (Lok Sabha) election and adverse weather, including heavy rain and heat waves,” SMC told analysts. “As inventories have increased, we are making adjustments…This year, the festival season starts in late August, a little earlier than the previous year, and the higher the demand, the volume for the whole period becomes bigger.”

 


Maruti Suzuki’s production increased 7.4 per cent year-on-year to 496,000 units in the first quarter of 2024-25, but sales nudged up only 1.2 per cent Y-o-Y to 427,000 units. MSIL holds a 40 per cent share in the Indian car market.

 


“The full-year growth forecast by Siam for this year remains around 2-3 per cent higher than the previous year. In particular, in the second half of the financial year, we will place efforts to increase the number of units to the same level as initially planned, incorporating government measures,” SMC mentioned.

 


Retail sales showed signs of improvement in July, compared to the April-June level, SMC noted, adding that there was a 3 per cent Y-o-Y increase in retail sales from April through July. “But inventory adjustments are still needed. The key is to stimulate demand for the festival (season) that starts in late August and (culminates with) Diwali in late October.”

 


In response to Business Standard’s queries, MSIL’s senior executive officer for marketing & sales, Partho Banerjee, said the company’s inventory stands at 38 days. “We do not intend to reduce it further as we consider our stock level is ideal for the upcoming festival season, including Onam in Kerala, Ganesh Chaturthi in Maharashtra, and Navratri, followed by Diwali in North India in October 2024.”

 


In its annual forecast earlier this year, SMC had anticipated a 2 per cent Y-o-Y growth in Indian car sales, with MSIL expected to outpace the broader market. SMC, in its August 6 call, reiterated that its full-year outlook remains unchanged because demand for Indian automobiles is still uncertain.

 


For the first quarter of 2024-25, SMC generated $3.86 billion in revenue from its India car sales, which accounted for 42.7 per cent of its global total of $9.04 billion. Its net profit surged 56 per cent Y-o-Y to $0.78 billion, driven largely by robust performance in Japan and Europe.

First Published: Aug 20 2024 | 9:12 PM IST

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