Why did Maruti Suzuki sales fall in November 2020?

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Maruti Suzuki became the only carmaker in the top five category to register a drop in sales in November 2020. This came on the back of two consecutive months of robust double-digit growths. Sales of the Alto and Swift maker fell by 2.4 percent during November while the industry grew by 9 percent during the same month.

So was it demand fatigue, fierce competition or a combination of both behind the fall, which has spooked market watchers? None, as per a company official. The real reason behind the fall was due to the record low factory inventory and production shortages.

Speaking to Moneycontrol, Shashank Srivastava, executive director, marketing and sales, Maruti Suzuki India, said: “In November, our opening stock was very low. There was very little of it because we had record dispatches in October.”

In October 2020, Maruti Suzuki dispatched around 166,000 units, which was its highest-ever in a month. But in November, the company recorded dispatches of 135,775 units as against 139,133 units recorded in the same month in 2019.

“What we could dispatch in November was only what we were able to produce in November. The number of working days in our factories in November were much lesser. Still, we worked at full capacity, and produced 137,000 units for the domestic market (including the light truck Super Carry) and that’s what we dispatched,” added Srivastava. Supply chain (auto parts availability) is still an issue in the auto industry. Plus, Diwali holidays also hit factory output.

Maruti's drop in November sales was the first since June, fuelling speculations that India’s consumer demand revival was short-lived and largely dependent on pent-up demand created due to the lockdown. This theory was amplified when Maruti’s mini segment comprising Alto and S-Presso recorded a fall of 15 percent in volumes during November. Following the easing of the lockdown restrictions, buyers have preferred pocket-friendly car models such as those from the mini segment to avoid taking public transport.

The retail quotient

While wholesales (company to dealers) did take a knock in November, retail (dealer to consumer) volumes remained upbeat, growing by 69 percent compared to the same month last year, claimed Srivastava.

“Maruti Suzuki’s market share in the retail segment is still more than 50 percent and it has remained like that, right from the start of the year. It was 45 percent in November last year. We grew our retails by 69 percent compared to last year’s November. We sold 167,500 in November this year compared to 99,500 last year,” added Srivastava.

Retail volumes remained high in November despite the discounts hitting a yearly low. At an estimated Rs 17,500, the average discount offered on a Maruti Suzuki car during November was the lowest since the start of the financial year. The highest discount was offered during the June quarter of Rs 25,000 per car at the wholesale level.

“As the stocks are lower right now, one would see lower discount figures in December as it was in November. December would be even lower than November,” added Srivastava.

How did Maruti’s rivals fare?

Hyundai Motor India, which, like Maruti Suzuki, is also running its plants at full capacity, recorded a 9 percent growth in wholesale volumes in November. Tata Motors managed to keep up with its monthly production rate of November on par with the last few months. The Mumbai-based company doubled November wholesales compared to last year’s November.

Kia Motors continued its upward swing, recording a 50 percent growth in wholesales followed by a 28 percent growth recorded by Mahindra & Mahindra. These five companies, which generate 86 percent of the industry’s volumes, make up the top five passenger vehicle makers in India.