Maruti Suzuki expects passenger car sales across the industry will grow in 7-10% range in 2012-13 (April-March), more than twice as fast it grew in the last fiscal year, but still much slower than the 30% it accelerated in 2010-11.
Car sales in India were hit by expensive loans and fuel price hikes in 2011-12 and Shashank Srivastava, Maruti's chief general manager - marketing told CNBC-TV18 on Wednesday that the first half is likely to remain difficult for auto makers.
"I don't see the fundamentals changing at this point of time. The interest rates continue to be high. Fuel prices are actually high and rising. So I don't see a significant change in the basic fundamentals and I think the first half of this fiscal year is going to be tough for the industry," he said.
Industry watchers say the festive season post September coupled with a cut in interest rates will help car sales pick up pace.
Last fiscal year sales of India's largest passenger car maker slipped 11% from a year ago to 11,33,695 units as people shunned petrol cars and sales of its popular Swift hatchback were hit by a labour strike at its Manesar plant.
Its sales picked up in the last three months helped by the launch of new Swift and compact DZire and resumption of normal production at its plants.
The diesel variants of Swift, Ritz and DZire have been driving sales for Maruti Suzuki since petrol prices went up sharply last year and that trend is likely to continue this fiscal too, with petrol prices likely to go up again.
Maruti is boosting its diesel engine capacity. It signed a diesel engine sourcing deal with Fiat India in Jan and also announced plans to expand diesel engine capacity in Gurgaon in March.
Further, the company is launching a multi-utility vehicle Ertiga later this month, its first in this segment, and that should also boost its sales this year, feels Srivastava.
Maruti Suzuki, like other car makers, hiked prices from April, to pass on the hike in excise duty by the Union and several state governments. Srivastava said pricing action going ahead will depend on commodity movement.
Raw material expenses account for 77-80% of total costs, he said.
Below is the edited transcript of his interview on CNBC-TV18. Also watch the accompanying video.
Q: While numbers were still strong at over 1 lakh, there was some concern that it probably missed street estimates. Are there any concerns that you see cropping through either in terms of competition or any of the taxation changes?
A: The January-March quarter was pretty strong for us. We did 320,000 plus vehicles, which is significant in the sense that we required those numbers to achieve the 1 million domestic sales mark and we did that.
Yes, March sales were strong both in the industry as well as for Maruti Suzuki. We did our highest ever numbers, so did the industry. The industry was about 294,000 units, which is extremely high. The industry witnessed a growth of 20% growth in March. Of course it's helped by the fact that there were rumours around the Budget that excise duty will increase.
There was a last minute push because from April 1, the new road tax and registration kickstarts in some of these states. Also the fact that the last week was Navratra considered to be very auspicious. But I would say that it's like a storm before the lull because I don't see the fundamentals changing at this point of time. The interest rates continue to be high. Fuel prices are actually high and rising. So I don't see a significant change in the basic fundamentals. I think the first half of this fiscal year will be tough for the industry.
amit pratap singh
pgdm 2nd sem
