Maruti, Hyundai to ramp up production in Dec as festive demand sustains

Carmakers concentrated on reducing inventory while factory production was lesser this month due to holidays
India’s two largest carmakers — Maruti Suzuki and Hyundai — are looking to ramp up production in December as they see strong signs of demand sustaining even after the festive season.

Carmakers concentrated on reducing inventory while factory production was lesser this month due to holidays, and November auto sales fell below estimates as a result. The plans of Maruti Suzuki and Hyundai are strong signals to the industry as together they had a 68 per cent share of the domestic passenger vehicle market in financial year 2019-20.

“The current industry stock level is around 15 days, which I will call suboptimal. We have seen demand sustaining after November 16 (Diwali), which indicates that pent-up demand is still continuing. Since we lost a few working days in November due to holidays, we will be making up for it in December,” said Shashank Srivastava, executive director, Maruti Suzuki.

Tarun Garg, director, sales and marketing at Hyundai, said the company will ramp up production to respond to the good response to its new i20, launched just before Diwali. “Hyundai’s stock level is currently less than one month, which we want to increase to 30 days, so that we can respond to increasing demand from customers,” Garg said.

Maruti Suzuki reported a 2.4 per cent year-on-year (YoY) decline in domestic wholesale in November to 135,775 units, as it reduced inventory at dealerships after the festive season. Volume dropped by 5 per cent in the core mini & compact portfolio.

“We have been able to clear a lot of stock level during the month. It helps our dealers to free up liquidity and increase their profitability. But we have to keep it at a level that should comfort a customer. The current stock level is too low,” Srivastava said.

Maruti’s stock level at the end of November stood at 67,000 units, down from 95,000 at the beginning of the month

Srivastava said though automakers reduced wholesale dispatch during the month, retail sales received very good response and grew by 69 per cent for Maruti Suzuki during the month.

“Actual retail sales have been very heavy and we continue to see high enquiry levels even post the festive season,” Srivastava said, cautioning that sustained high sales number will depend on overall income levels and how the Covid-19 situation unfolds.

S S Kim, MD & CEO at Hyundai, had earlier said the company sees pent-up demand subdued due to lockdown of two months to sustain till end of March 2021.

“We did an internal study and we have estimated that there were almost 1 million buyers who would have bought during that period, who will buy in near future. That demand will last till the first quarter of calendar year 2021. After that period there might be a lull,” he said. Automakers saw zero sales in April because of the nationwide lockdown, leading to Suzuki Motor Corp, Maruti Suzuki India’s parent, forecasting a double-digit decline in net profit and revenue this fiscal year, saying it will not be able to recoup the losses in vehicle sales in India and Japan in the June quarter.

Analysts said while consumer demand may see a slump immediately after the festive season, it will pick up as economic activity increases.

“Looking ahead, we expect decent volume traction to continue in Q4 of FY21 due to improved economic activities across the country, while the scenario may become a bit challenging in the near term due to post-festive slump,” Mitul Shah of Reliance Securities noted in a report.

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