Maruti Suzuki: In first gear

Lower car prices don't seem to have tempted buyers

Maruti Suzuki's numbers for March 2008 are disappointing to say the least because the excise duty cut of 4 per cent seems to have had very little impact.

Domestic sales for India's biggest car manufacturer, have actually fallen 0.2 per cent in March with the B segment, which includes models such as the Zen,Wagon R, Swift and the smaller Alto seeing a huge 11 per cent fall over the previous year.

Industry watchers had interpreted the muted sales growth in February to mean that customers were waiting for the budget and therefore postponing purchases. Now that the numbers are out, that doesn't seem to be correct. Since model-wise sales are not available, it's hard to tell which models haven't done well.

However, if the sales of the B segment have been sluggish because the company has sold fewer models of the Zen or the Wagon R, it will not be as disappointing as if fewer numbers of the Swift have been sold. Industry watchers say it's also possible that consumers have upgraded and have bought the Dzire instead of the Swift.

Interestingly, sales of Maruti 800 are up 3.5 per cent. Sales of C segment cars were up 212 per cent on a low base: the SX4 was launched only in May 2007 and the new sedan DZire was launched din mid-March.

At a number of 5,658, sales of the Dzire have been more than encouraging though even the management recognises that this kind of momentum cannot be sustained and that sales will taper off once the novelty value goes.

The Rs 14,654 crore car maker is expected to close FY08 with revenues of Rs 21,300 crore and a net profit of Rs 1,900 crore. At the current price of Rs 816, the stock trades at just about 11 times estimated FY09 sales and is not expensive. However, it may be worth it to wait a couple of months to see how car sales move given that the economy is slowing down.

Tata Motors: A better tempo

India's biggest automobile firm, the Rs 32,371 crore Tata Motors turned in a sales growth of 6 per cent in March 2008, a tad better than expectations. The company appears to have aggressively marketed commercial vehicles (CVs), which have seen a growth of about 17 per cent during the month.

However,Tata Motors will end FY08 on a disappointing note with total sales volumes including exports, seeing a growth of just one per cent over the previous year. Tata Motors's share of the CV market is about 63 per cent with Ashok Leyland being the other big player in the industry.

The CV industry has been in a slump for some time now and the company continues to face keen competition in the passenger car segment. In fact, sales of passenger cars fell 4 per cent in March, with the Indica faring poorly.

Between April 2007-February 2008, CV sales grew just 2.8 per cent over the corresponding period of the previous year and the sluggish sales trend is expected to continue for another six months or so, say industry watchers, especially with the economy showing signs of slowing down.

A weaker economy could also see a slower growth in car sales which are are expected to grow by just about 8-10 per cent in FY09. While Tata Motors has tied up with Fiat and will have access to state of the art technology for diesel cars, it will nonetheless be up against some keen competition from Maruti and Hyundai Motors.

Tata Motors is expected to close FY08 with consolidated revenues of Rs 35,400 crore and a net profit of close to Rs 2,400 crore.