Maruti launches XL6; warns of more job cuts if demand remains poor

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Published: August 22, 2019 5:21:18 AM

The company on Wednesday launched its six-seater MPV XL6 at a price range of Rs 9.79 lakh to Rs 11.45 lakh, which will be sold through its Nexa dealerships.

Maruti XL6,  Maruti XL6 launch, Maruti launches XL6, maruti suzuki xl6, maruti share, maruti suzuki xl6 nexa, maruti swift, automobile industry, jobe loss, auto sectorMaruti Suzuki India MD & CEO Kenichi Ayukawa (L) and MSI executive director, marketing and sales, Shashank Srivastava during the launch of XL6

With poor auto sales leading to thousands of job losses, Maruti Suzuki on Wednesday warned of further layoffs if the demand doesn’t pick up either during the upcoming festive season or beyond that.  The country’s largest carmaker had to let go of over 3,000 temporary workers due to cut down in production owing to the prolonged slowdown in domestic car sales. The company has been cutting production across factories since February this year in the range of 12-25% year-on-year (y-o-y), to manage inventory which has been higher than normal since the second half of the previous fiscal.

Maruti Suzuki executive director (marketing and sales) Shashank Srivastava said if the slowdown continues, the production is bound to be lower which may lead to further resources being reduced.

“Why would you send more stock to dealers when it is still high and why to keep more stock in factory? If the production is reduced, the corresponding resources will also be reduced. How many and for how long, I cannot say,” Srivastava said on the sidelines of the launch event of its new multi-purpose vehicle XL6.

Car sales, which have remained subdued since July 2018, fell to new low of 31% y-o-y in July 2019, the sharpest decline in 19 years. Poor retail sales due to weak consumer demand have left dealers saddled with high inventory, as a result of which banks have been cautious in lending to dealers on fears of default. To address the inventory funding challenge, Maruti brought on board new banks to offer retail financing to its dealers.

Srivastava said the company is in talks with banks like Bank of Baroda, Axis Bank, SBI and ICICI Bank to do away with the collateral requirement for financially sound dealers and in turn accept the status report given by the company on stocks sold.

“Banks don’t know if the vehicle is sold or not. As a way of comfort, we will give a status report to them on stock sale so that banks remain updated and are relieved on repayment uncertainty,” Srivastava said, adding that the company is discussing on other ways of security that banks want before lending.

Typically, a dealer borrows from banks and NBFCs to purchase stock from the manufacturer, which is paid back once the vehicle is sold. Since vehicle sales are not happening as per expectations, banks and NBFCs have stopped funding.

Despite slowdown, Srivastava said Maruti will continue launching new products, hoping that new models will attract buyers. The company on Wednesday launched its six-seater MPV XL6 at a price range of Rs 9.79 lakh to Rs 11.45 lakh, which will be sold through its Nexa dealerships.

The XL6, compliant with BS-VI emission norms, is powered by the same 1.5-litre petrol engine that is fitted in the Ciaz sedan and the standard Ertiga. The engine generates 105hp and 138Nm of torque comes with Maruti’s SHVS mild-hybrid technology. The vehicle will compete with Mahindra Marazzo, Honda BR-V, Hyundai Creta as well as new entrants like Kia Seltos and MG Hector.

Sales of Ertiga have been averaging at around 8,000 units per months. With the launch of CL6, Maruti’s portfolio of utility vehicles has three models — the other two being Vitara Brezza and Ertiga.

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