Don't be fooled by Maruti's robust sales; troubles still lurk

New Delhi: The robust sales numbers of Maruti Suzuki India this March mask a host of worries.

On the face of it, Maruti reported its third consecutive monthly sales of over one lakh units in the financial year ending March at 125,952 units, 3.3 percent up over last March's 121,952 units. This includes 13,228 units for exports, a growth of 14.7 percent. March sales for Maruti are the highest-ever in a single month in the company's history - the previous high was 121,952 units in March 2011.

But worries remain for Maruti, despite the good show. Firstly, the reported numbers are factory dispatches and not actual retail numbers, so there is no way of knowing immediately if cars are piling up with dealers.

[caption id="attachment_263190" align="alignleft" width="380" caption="Due to a sudden shift in the market towards diesel in the current financial year ending March 2012, Maruti finds itself stressed. Reuters"][/caption]

Secondly, due to a sudden shift in the market towards diesel in the current financial year ending March 2012, Maruti finds itself stressed in coping with diesel demand.

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While it announced big investments in diesel last week, the company may suffer till these go onstream due to lack of diesel vehicle supplies.

Speaking to Firstpost, Managing Exective Officer (Sales & Marketing) Mayank Pareek had said late last week, "In the past four months, demand for diesel has overtaken that for petrol vehicles, diesel now accounts for over 50 per cent of cars sold. If all diesel cars on demand were available, that figure would be 60 percent. Maruti's share in the diesel market is only 23 percent now, and even after new diesel capacities are added it will be just 40 percent. So we are just reacting to the spike in diesel demand, not being proactive about it."

He also pointed out that the March quarter was the first in the past financial year to have normal vehicle supplies (supplies were crippled in earlier quarters due to a workers' strike) so the company managed to show a good growth in sales numbers.

"But going forward, rising fuel prices and high interest rates will remain a concern," Pareek added.

Diesel predominance in the buyers' minds is evident from the car models in which Maruti has seen higher growth in March. The company offers diesel options in Swift, Dzire, Ritz and SX4.

Combined sales of Swift, Estilo and Ritz rose 23.6 percent to 27,913 units (22,576 units). Sales of Dzire rose 60 percent to 16,451 units (10,278 units). Only SX4 declined, by 58 percent to 1,520 units (3632 units).

In contrast, the country's largest-selling small car model, Alto, reported a fall. Alto does not have a diesel variant. Pareek said sales were lower by about 11 percent until February and even in March, the combined sales of Alto, M800, WagonR and A-Star were lower by 10 percent to 52,826 units (58,799 units). He pointed out that the decline was more due to the postponement of purchases by entry-level car customers than growing demand for bigger or diesel cars.

Speaking earlier on the company's plans, Chairman RC Bhargava had said that in FY12, petrol cars showed a de-growth of 15 percent, while diesel cars grew by 35 percent.

He also said that at least 4 lakh diesel cars are still on the waitlist in the industry and that "industry capacity of diesel will define the growth in FY13".

Maruti expects sales to grow by 10 percent in the new financial year that started on 1 April. This year, the company is expecting to sell 50,000 petrol cars less than what it sold in FY12, while sales of diesel vehicles are forecast to increase by 150,000 units.

Maruti's board of directors has approved a new diesel engine plant at Gurgaon, which will begin by making 150,000 units by mid-2013; by 2014, capacity will be doubled. By 2014, the company's total diesel engine availability will be around 700,000 units.