With high-priced products such as compact hatchbacks, utlity vehicles and mid size sedans becoming more popular with customers, Maruti Suzuki's traditional products like the Alto, Swift and Dzire have clocked smaller volumes in recent months.
With high-priced products such as compact hatchbacks, utlity vehicles and mid size sedans becoming more popular with customers, Maruti Suzuki’s traditional products like the Alto, Swift and Dzire have clocked smaller volumes in recent months.
Between April and October volumes for the Alto fell 9.36% y-o-y to 1,39,574 units while those for the Swift fell 23.44% y-o-y to 95,367 units. During the same period volumes of Dzire (compact sedan) slipped by 22.13% y-o-y 97,127 units.
Surprisingly, sales of Swift and Dzire did not cross the one lakh mark in the first seven months of the year as happens usually. Volumes for the Celerio and Wagon R, however, increased around 2% y-o-y on the back of demand from the cab aggregators.
Ajay Seth, chief financial officer, Maruti Suzuki recently told analysts there had been a dip in first time buyers in the first half of the year. “It’s difficult to attribute to a particular reason but it could be the state of the economy and the relatively slow job creation which drives growth in this segment,” Seth observed in a post earnings conference call on the declining sales of Alto.
Experts say the slow recovery in the rural markets has stymied the sales of cars such as the Alto. At the same time demand for models such as the Dzire and Swift has shifted to products like Baleno and Ciaz as aspiring customers in the cities upgrade to a feature-rich car.
Some dealers told FE even first-time customers in metropolitan cities have started opting for cars like Baleno and Vitara Brezza. Rather than buying the Dzire, they are willing to pay a little extra for the Ciaz which now comes with a hybrid diesel (SHVS) engine, known for its fuel efficiency.
According to analysts, Maruti Suzuki’s EBITDA (earnings before interest, depreciation, tax and amortisation) margin could inch closer to 17% in FY2018/19 as result of the company selling more premium products.
“We believe MSIL margin will cross its historic peaks over the next few years as competitive launches are weak, Maruti has started to capture market share in highly profitable segments (compact SUVs, premium hatchback) and the company’s expansion of distribution centers at a faster pace than competition due to strong dealer profitability,” said analysts of Kotak Institutional Equities in a report on the company.
Not surprisingly the country’s biggest car maker is inching towards a leadership position in midsize sedan, premium hatchback and SUV segment. The company has also increased the production capacity of Baleno to 15,000 units per month while the same for Brezza has been increased to 9,000 units per month.
Maruti has been working on revamping the existing models by 2018 but the management has never commented on this development.