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After reporting strong sales growth for four fiscal years in a row, India's largest car manufacturer Maruti Suzuki expects to end FY19 with single-digit sales growth, according to a report by Business Standard.
This assumes significance as the management had set a target of double-digit sales growth at the start of the fiscal. But floods in Kerala, record high fuel prices and higher insurance cost has impacted demand since July.
Despite a 24.3 percent growth in volume in Q1, growth for the first half of FY19 slipped to about 10 percent. In April-November, volumes grew just 7.4 percent to 12.7 lakh vehicles, as against a growth of 14.6 percent in the same period last year.
To achieve its double-digit growth target, Maruti will have to grow at a minimum 15 percent in Q4 FY19.
RC Bhargava, Chairman, Maruti Suzuki, told the paper, "I do not think a 15 percent growth is possible in the rest of the four months when the past five months saw a flat or no growth. No event can take the market to a high double-digit rate of growth. But we will still close the year with a single-digit growth."
The auto major managed to achieve stellar growth rates in the past four years with the launch of Baleno, Brezza and the new Dzire.
In FY18, volumes expanded 13.4 percent YoY to 17.7 lakh units. Had this pace of growth continued, the management would have achieved its annual sales target of two million units before 2020.
"We could have got closer to two million units in FY19. Now, it will happen next fiscal," Bhargava told the paper.
It is important to note that the slowdown is not restricted to Maruti alone, but since the carmaker commands a domestic market share of 52 percent, a slowing growth rate raises doubts on the growth outlook for the entire industry.
What's worrying is this is an industry-wide trend with manufacturers adjusting production and offering heavy discounts to pare down inventory levels.
The Federation of Automobile Dealers Association (FADA), the apex association of automobile dealers, the registration of passenger vehicles (cars, vans, and utility vehicles) declined by 14 percent to 287,717 units in the 2018 festive season compared to last year, the report said. Dealers, it added, have been saddled with unusually high inventory levels, triggering heavy discounts to clear stocks.
Bhargava said Maruti does not plan to reduce the speed on expanding its network. "India is among the fastest growing car markets in the world. Short-term blips do not matter. We remain absolutely confident of the long-term growth prospects of the market," he told the paper.
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