Despite festive boost, Maruti expects sales to rise only 6-7%

Written by Ronojoy Banerjee | Ronojoy Banerjee | New Delhi | Updated: Aug 30 2011, 10:32am hrs
Buffeted by costlier inputs and fuel, rising interest rates, labour trouble and an uncertain global economy, Maruti Suzuki is bracing for a rough patch. Indias largest carmaker, which clocked 25% sales growth last fiscal, expects a bare 6-7% this time. A formal announcement is expected at Marutis annual general meeting on September 8, which will be attended by Osamu Suzuki, chairman of Suzuki Motor, the parent company of Maruti Suzuki.

Analysts are more pessimistic, expecting a meagre 3-4% growth, matching the worst seen at Maruti in recent years in 2008-09, when sales inched up 3.5%.

We will tell our shareholders that it would not be possible to grow in double digits this fiscal. We will see single-digit growth instead. I would be reasonably satisfied if we (Maruti) grow at 6-7% this fiscal, company chairman RC Bhargava told FE.

Carmakers, he said, would not be able to meet the growth forecast of 10-12% set by the Society of Indian Automobile Manufacturers (Siam), since macro-economic indicators were under pressure. The expected boost from festive sales, he said, would not be enough to meet Siam's expectations. India's auto industry had clocked a growth of 30% last fiscal.

However, analysts find Bhargava's projections a bit too optimistic. Surjit Arora, auto analyst with brokerage Prabhudas Lilladher, said the market expects Maruti sales to grow only 3-4% this fiscal, with industry growth pegged at 6-7%. There are a few challenges for Maruti: yen is appreciating strongly while people are moving towards diesel cars. Only about 25% of cars Maruti sells is diesel, he said.

Competition is getting stiffer for Maruti. It will be a challenge for the company to maintain market share, Abdul Majeed, leader of automotive practice at PricewaterhouseCoopers said.

Cars sales have been flat since the fiscal began. A total of 5.98 lakh cars were sold in April-July, just 1.12% more than 5.92 lakh in the same period last year. During the period, Maruti saw its sales dip 2% to 3.78 lakh units.

For Maruti, macro-troubles have been only part of the problem. Due to the 13-day labour action at Maruti's new plant at Haryana's Manesar which makes Swift, DZire, Ritz and A Star over 12,000 units could not be built, leading to a loss of Rs 420 crore. On Monday, the company was again forced to shut its plant after a face-off with workers, since they were not meeting the target of making 1,200 units a day.