Maruti Suzuki share price falls over 1.5% as car production plunges to less than half

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Published: July 8, 2020 11:19 AM

In the wake of coronavirus-triggered nationwide lockdown, Maruti Suzuki had temporarily shut down production at its facilities in Haryana in March this year.

Maruti suzuki, maruti suzuki share price, maruti suzuki productionMaruti Suzuki stock price has rallied 53 per cent from March lows of Rs 4,002 apiece, with market capitalisation at nearly Rs 1.86 lakh crore. Image: Reuters

Shares of Maruti Suzuki India (MSIL) fell over 1.5 per cent to hit day’s low of Rs 6,156 apiece on BSE, a day after the company informed that its total productions declined nearly 55 per cent to 50,742 units in June 2020 from 1,11,917 units produced in the corresponding period of the preceding year. Maruti Suzuki stock price has rallied 53 per cent from March lows of Rs 4,002 apiece, with market capitalisation at nearly Rs 1.86 lakh crore. Total passenger vehicle production fell 54.87 per cent to 49,476 units in June 2020 as compared to 1,09,641 units in June 2019. “We believe that the OEM is expected to gain market share in the current downturn, given its dominant position in the entry-level/compact car segment, where the company has a market share of 65%,” HDFC Securities said in a research report.

Research and brokerage firm HDFC Securities has recommended to ‘buy’ Maruti Suzuki shares, saying that the company will withstand the downturn due to its scale, robust balance sheet and cash reserves of Rs 40,000 crore. The total sales of Maruti Suzuki plunged 54 per cent to 57,428 units in June this year as against 124,708 units sold in the corresponding period of last year. In an interview with news agency IANS, Shashank Srivastava, Executive Director (Marketing and Sales), Maruti Suzuki India, said that there is no economic logic for buying diesel cars. Till 7-8 years back, diesel prices were cheaper by Rs 32 as compared to petrol. In the extant scenario, there is almost parity in diesel and petrol prices.

However, HDFC Securities believes that Maruti Suzuki will benefit from its gasoline-driven portfolio as the breakeven for diesel vehicles has further increased after the introduction of BSVI variants. In the wake of coronavirus-triggered nationwide lockdown, Maruti Suzuki had temporarily shut down production at its facilities in Haryana in March this year. It resumed production at its Haryana-based Manesar plant from May 12, 2020, in a phased manner. Another research and brokerage firm Motilal Oswal Financial Services said that if retail momentum remains intact, “we believe production can play catch-up with demand”.

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