With the hatchbacks, especially in the entry-level segment, seeing lukewarm sales this financial year compared to the pre-COVID times, Maruti Suzuki India Limited (MSIL) affirmed that going forward it will be sharpening its focus on Sports Utility Vehicles (SUVs) across segments than towards small cars run on internal combustion engines (ICE). Besides, it will launch the Compressed Natural Gas (CNG) variants of some of the existing petrol-driven models.
“In the second quarter (of this FY), hatchbacks have shown growth, but that is limited to the festival season. I don’t see this segment’s growth continuing subsequent to this quarter and early next year. This simply means the ability of people, whether in urban or rural areas, to buy hatchbacks has eroded. By next year, there will be a degrowth in the hatchback segment,” R.C. Bhargava, Chairman, MSIL, said post Q2 FY2022-23 results announcement.
The country’s largest passenger vehicle-maker stated that sales of entry-level cars will continue to degrow as consumers’ disposable income has reduced due to higher prices and inflationary pressures. However, it must be mentioned that this phenomenon does not seem to have adversely impacted the spending power of buyers who are aiming at SUVs.
Its overall market share, which was at 51 per cent in FY2019, has gone down to 41 per cent during this September quarter.
“The small car segment has been declining (since FY2018-19) and has lost around 26-28 percent of numbers during this period,” added Bhargava.
Maruti Suzuki also acknowledged that volumes in the entry-level car segment are declining as prices have surged due to regulatory requirements around safety and emissions and higher cost of inputs. When asked how the company is planning to re-engineer its small cars in order to comply with safety norms, he maintained that the auto industry body has been discussing this matter with the government.
“The industry is taking up this question as to what would be a realistic date of not only implementation of six airbags, but also of installing the three-point seat belts at the rear seats,” stated the chairman of MSIL.
Meanwhile, MSIL on Friday reported a rise of 334 percent year-on-year (YoY) in standalone net profit at Rs 2,061 crore in Q2 FY23 on the back of record volumes of its newly-launched SUVs, Grand Vitara, and Brezza, during the quarter.
“Compared to the earlier composition, there will be a higher percentage of sales in the upper end of the market compared to the lower end and we will be adapting our product portfolio accordingly,” added Bhargava. However, he didn’t share what kind of models will be introduced. He was also categorical that MSIL had no plans to phase out any small cars from its product portfolio.
MSIL has garnered 75,000 units of confirmed bookings for the Grand Vitara, of which a little over a third (25,500 units) is from strong hybrid variants. So, out of pending orders of 60,000 units, 20,100 units is for the strong hybrid variant (about 34 percent).
“Aggressive product strategy and heightened focus on the SUV segment will undoubtedly help Maruti Suzuki make a strong comeback and regain its lost market share. We have seen in the past too, its ability to understand the market and consumers is unparalleled, and the company has always bounced back with more power and emerged as a winner,” said Puneet Gupta of S&P Automotive.
MSIL, meanwhile, has not given up on the challenge of hitting the two-million sales mark.
“The major determinant of our ability to succeed is semiconductor availability. There is a constraint of semiconductors, fundamentally from one company. And that is affecting four of our models," revealed Bhargava.
Bhargava did not concur with the industry perception that Maruti Suzuki is late in foraying into the electric passenger vehicle segment (slated for 2025 roll-out).
"We are localizing the components, looking at the infrastructure development in the country. An electric vehicle customer should not face issues," he said.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
