Maruti Suzuki India Limited, the largest carmaker of India and also the biggest contributor to the Suzuki Motor Corporation’s global sales and revenue, may post a 20% drop in its sales in the current financial year, according to the forecast made by the Japanese auto giant.
The analysts were expecting the ongoing Coronavirus pandemic would leave a smaller impact on Maruti Suzuki, because of the strong pick up demand the carmaker is witnessing post-lockdown and especially during the festive season. However, Suzuki’s forecast about Maruti Suzuki sales decline has surprised the analysts. This was the first time Suzuki has given a forecast for FY21, for the company’s own performance and of its largest subsidiary unit as well.
Toshihiro Suzuki, President, Suzuki Motor Corporation, told the Japanese analysts that the company is still uncertain on the Indian market because of the current Covid-19 pandemic situation. India has recorded over 8.55 million positive Covid-19 cases so far, while more than 1.27 lakh people have died due to the infections. “We don’t know what will happen to Coronavirus in India or what measures the government will implement; so that makes the market difficult to predict,” said Suzuki.
According to Goldman Sachs, 20% drop in sales prediction for Maruti Suzuki is more cautious than its assumption of a 15% decline. Credit Suisse said it expects a 14% dip in Maruti Suzuki’s sales. On the other hand, Morgan Stanley that raised its forecast for the company based on the Q2 results, said that it expected Suzuki’s guidance to be lower than its own expectations.
In October 2020, Maruti Suzuki has posted 182,448 units of sales combining domestic numbers and export, up 18.9% from 153,435 units posted in the same month in 2019. The automaker posted 27.1% drop in sales during April-October 2020 period, with 652,177 units registered, as compared to 894,346 units during the same period last year.
In the domestic market, the automaker sold 172,862 units last month, up 19.8% from 144,277 units recorded in October 2019. In the first 7 months of FY21, Maruti Suzuki recorded a sales drop of 26.6% with 610,508 units registered, as compared to 831,277 units of the same period in FY20. Overall, the carmaker posted a 36% drop in sales volume in the first half of current fiscal with around 469,000 units sold.
With the gradual reopening of the Indian economy and improvement in supply chains, Maruti Suzuki sold 3,93,130 vehicles in Q2 (July-September) FY21, up 16.2% as compared to the same period in FY20. Maruti Suzuki said that its overall sales were good during October 2020, especially during the Navratri period, it registered 96,700 units, up from the same month in 2019, despite the Coronavirus pandemic has hit the auto industry and consumer sentiment hard.
Maruti Suzuki also registered a marginal 1.0% growth in net profit at Rs 1,371.60 crore in the second quarter (July-September) of FY21, as compared to Rs 1,358.60 crore in the corresponding quarter in FY20. Commenting on this, RC Bharagava, Chairman, Maruti Suzuki India Limited, said, “We cannot term this as growth as we are much lower than we were two years ago. I would call it a rebound when sales exceed at least 10% of what we sold in FY 2018-19.”
Bhargava indicated that the company foresees demand only till December 2020 and unable to comment beyond that. Several analysts too speculates that post the festive season, the demand will be muted in the domestic auto market. Toshihiro Suzuki’s forecast comes in the similar lines to that.
Globally, Suzuki estimates its sales to be around 2.37 million units in FY21, recording a 16.6% drop from FY20. In the first half (April-September) of the current fiscal, Maruti Suzuki contributed 26% of Suzuki’s total automobile revenue of 1.1333 trillion yen and 45% of total automobile sales volume amounting to nearly a million.