Amid sluggish market conditions and an ongoing labour tussle at its Manesar facility, the country’s largest manufacturer Maruti Suzuki India Limited (MSIL), may have to further revise downwards its sales target for this financial year.
It had set a target to grow by 13 per cent to sell 1.44 million units at the beginning of the financial year. But in June, it lowered its sales forecast to 1.37 million units (a growth rate of 8 per cent). Osamu Suzuki, chairman of the parent company Suzuki Motor Corporation, had indicated growth of 5 per cent to 1.33 million units seemed more likely.
With labour unrest disrupting production for over three weeks in this month and slow off take of vehicles on the back of slackening demand, industry observers say, MSIL would find even a growth of five per cent difficult to achieve.
“If the labour unrest persists it will definitely have an impact on sales. Market conditions will only worsen with the hike in petrol prices and interest rates last week. Under the present scenario, it would be difficult not only for Maruti but for all auto makers to achieve their targets”, said Abdul Majeed, leader, automotive practice, PricewaterhouseCoopers (PWC).
Maruti Suzuki, which accounts for over 40 per cent of all cars sold in India, has been able to hawk only 448,261 units (including exports) in the first five months of the year. Its sales declined by around eight per cent between April and August. It suffered a production loss of 12,600 units due to a 13-day strike at its Manesar unit in June and about 17,000 units due to temporary halt in production of Swift and DZire in July.
If MSIL is to achieve even growth of five per cent, it would have to raise average monthly sales by over 40 per cent consistently for the rest of the year. This means additional sales of 36961 units a month, compared to the average 89,652 units it has sold a month this financial year. Even at a time when the industry was recording growth rates of around 30 per cent last financial year, the highest monthly sales MSIL had achieved was 121,952 units in March, lower than the average monthly sales of 126,613 units now required to be sold to grow by five per cent this year.
Kapil Singh, lead analyst (automotive), Nomura Securities Company Ltd, said, “Market conditions are tough, production has been hit by the strike. There is a risk that the company has to revise targets downwards.”
Meanwhile, MSIL is pinning hopes on the festive season to rev up sales. Mayank Pareek, managing executive officer (marketing and sales), MSIL said, “The labour issue will definitely be resolved. Production has been partially shifted to Gurgaon and employees are putting in extra hours at Manesar to make up for the loss in production this month. Petrol prices have increased again last week which will put further pressure on sales. Everybody including Maruti is now hoping the festive season will provide some respite. Whether we can achieve targets depends on how we fare in this period."
