Increase in demand from first time buyers and gradual lifting of the lockdown has pushed demand for Maruti Suzuki cars to climb to 90 percent of pre-COVID-19 levels forcing the company to start another shift at its Gujarat plant.
Strong uptick in retail sales which was nearly double than the wholesales in June has led to inventory levels of Maruti Suzuki come down by end of last month. While domestic passenger vehicle wholesales (company to dealer) stood at 51,300, its retails (dealer to consumer) stood at slightly over 90,000 units.
As against the usual 30-35 days, the car market leader’s inventory days dropped to 25 by end of June to just 80,000 units. For the industry the inventory is estimated to be at 170,000 units, according to a senior executive of Maruti Suzuki.
“If retail sales, bookings and enquiries are the parameters for defining demand then I would say that it is around 85-90 percent of the pre-Covid-19 times. The bounce back has been encouraging and we are looking forward with a lot of optimism,” Shashank Srivastava, director (sales and marketing), Maruti Suzuki said in an analyst call.
First time buyers
Owing to the need for social distancing the new car market has seen a spurt in first time buyers. While there has been a general increase in demand for used cars, the smaller entry level hatchbacks in the new car industry have seen a rise in demand since the past few weeks.
“The share of first time buyers has gone up by a substantial 5.5 percentage points. The data on enquiry levels does indicate that there is a uptick in the demand for smaller cars than previous years and this has also reflected in our consumer research. We have to see what the demand patterns likely be because it is true that when the consumers revert to the original state the trend has been towards the SUV type,” Srivastava added.
The share of first time buyers has gone up even in the two-wheeler segment where companies like Bajaj Auto have reported that demand in July bounced back to 95 percent of the same month last year. Maruti Suzuki also believes that besides first time buyers demand from repeat buyers may also pick up.
“In June there were some states where retails were positive over retails of June last year as many states reopened. But there were some states like Kerala, Maharashtra and Tamil Nadu continue to be affected negatively,” added Srivastava.
The Delhi-based car maker has more than doubled production compared to June already. From less than 2,000 units a day clocked in June the maker of Swift and Baleno is currently producing more than 4000 units a day.
It is now looking to add another shift at its parent’s Gujarat plant from August-September which will push its total output up by 22 percent. The plant currently produces 900 units a day and could be ramped up to 1,800 units a day. This will come in handy as preparations are underway to launch the S-Cross petrol in the first week of August.
“We are currently doing a run rate of about 4000+ per day and because there is increased incidence of the COVID-19 infection in Gujarat we are running the plant on a single shift. Starting mid August and September first half we plan to open the second shift in Gujarat,” said another Maruti Suzuki executive.This will, however, depend on enabling conditions like availability of manpower and the COVID-19 infections remaining under check. “We should be able to add 900 units a day in production if we start the second shift in Gujarat. As of now we are not limited by demand but limited by supply,” added the executive.