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Demand strong but inflation, commodity prices could impact growth, says Shashank Srivastava

Price hikes by Maruti Suzuki and other companies have not been enough to offset the rally in commodity prices, says Shashank Srivastava, senior executive director, Marketing & Sales, Maruti Suzuki

June 22, 2022 / 01:04 PM IST

Maruti Suzuki recorded a 20 percent growth in unit sales in May against the same period in pre-Covid 2019, with India's biggest car maker showing no signs of slowing down despite the current inflationary environment.

"On the ground, demand looks strong," said Shashank Srivastava, senior executive director (ED), Marketing & Sales, Maruti Suzuki, told CNBC-TV 18 on June 22.

Srivastava, however, flagged rising interest rates that have made loans expensive, soaring fuel prices, inflation and high commodity prices, which have now begun to cool, as obstacles to growth.

Citing the 13.5 percent industry growth rate in the passenger vehicle segment in FY 22, Srivastava said absolute volume sales remain comparable to FY 17, reflecting pent-up demand.

"The industry is expecting a double-digit growth with targeted sales of 34 to 35 lakh units," he said.

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On the semiconductor shortage that has hit production, Srivastava said the company was producing at 95 percent capacity, a marked improvement over the 40 percent capacity in September 2021.

"I’m a little apprehensive to give an exact date because things are fluid and we don't have visibility of semiconductor availability for a long time in the future," Srivastava said. 

The automotive company saw its market share rise to an all-time high of 67 percent in the non-SUV segment, while its overall share remains below 50 percent.

“In the SUV segment, while in the industry there are 47-48 models, we have only two—Brezza and S-Cross. Clearly, we need to strengthen our portfolio in the SUV segment and that’s what we intend to do going forward,” he said.

The operating margins for the company fell to a historic low of 6 percent in FY 22. "We are not at the level of profitability which we had seen during the peak of 2017-18,” the ED said, referring to a spike in commodity prices hitting the margins.

The price hikes taken by Maruti and others had not been able to offset the rise in commodity prices, he said. "Steel is trading at Rs 68-70 per kg, and has come down from highs of Rs 84 but still well above the Rs 38 a kg it was trading at two years ago," he added.

The company has no plans to bring forward the rollout of its electric vehicle planned for FY24. "Launch of EV is not about putting a vehicle out there, but to make sure that the consumers who buy it are not inconvenienced by the lack of charging infrastructure," Srivastava said.

Speaking about the falling Yen, he said it was positive news for the company as it relies on imports from that country.

The rupee has fallen 3-4 percent against the US dollar as compared to the Yen, which has shed 11-12 percent in recent weeks. The gains from the fall in Yen, however, would depend on other distribution factors, he said.
Hriday Sahjwani
first published: Jun 22, 2022 01:04 pm
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