Owing to muted demand, the company has reportedly cut its production in March by 26.8% at 1,26,000 units.
With the passenger vehicle sales registering its slowest growth in the last four years in low single digits in FY19, RC Bhargava, chairman, Maruti Suzuki, feels that going by past trends, sales should pick up post-general elections, but from this month onwards new safety norms like ABS becomes compulsory for all cars which will lead to increase in prices.
In an interview with business news channel, CNBCTV18, Bhargava said: “Evidence of the past general elections shows that in the year before the elections, sales slowed down considerably. However, sales usually pick up post-general elections. In 2009-10, growth was almost 20% post-elections, in 2014-15 it was 12%. Whether that is going to get repeated this year or not is a big question, and all of us are keeping our fingers crossed.”
This was because of new safety regulations this year, which has made it difficult to ascertain the impact on sales in FY20.
“For instance, from today we are getting ABS compulsory on all vehicles. From July 1, we are getting airbags compulsory on all vehicles. My personal view is that we will see a pick up in sales coming along because all the years in the past, I have never seen two or three years of successive decline in sales. When we have a decline in one year, usually the next year becomes better because all the suppressed demand goes up. However, if the growth this year will be single digit or double because of all the regulations, I don’t really know,” he added.
Passenger vehicle sales for the past eight months have been witnessing subdued demand impacted by multiple factors ranging from rise in fuel and commodity prices, mandatory third party insurance norms, and liquidity crunch.
In March, Maruti Suzuki’s domestic sales declined 0.7% year-on-year at 1,47,000 units. Owing to muted demand, the company has reportedly cut its production in March by 26.8% at 1,26,000 units. “We adjusted production in March so that we didn’t end up with large inventory. It was done to ensure inventory management,” Bhargava added.