Maruti Suzuki paring production amid slowing sales and tepid demand

Maruti Suzuki India
Maruti Suzuki India, amid slowing sales and tepid demand, has been paring production month-on-month since the beginning of the current financial year to align its production to sales.  

The local arm of the Japanese carmaker produced 148,318 units of passenger vehicles in October, the lowest since the beginning of this fiscal year, shows the production data shared by the company with the BSE and Society of Indian Automobile Manufacturers (Siam). 

It produced 170,328 units in April. 

The only other month when it produced lower than it did in October was in June but the June volumes are not comparable with the remaining months because its factories were shut for a week as part for annual maintenance. 

Maruti’s spokesperson didn’t respond to questions.

The company's efforts to align production with sales have started showing results. It produced 1,110,325 units in the seven months of the current financial year, up 10 per cent over the same period a year ago. It sold 1,109,502 units in the same period, up 10 per cent over a year ago. The data includes production volumes at the Suzuki Motor Gujarat factory. 

In a reflection of the weak festive sales, the company’s production in August-October increased only marginally — 474,000 units this year against 467,000 units in the same period last year. 

In anticipation of higher sales during the festivals that fall in these months, companies typically ship higher units to their dealerships and build up stocks to make the most of the buoyant sentiment. In India companies count despatches to dealerships as sales. 

But this year has been different. Soaring fuel prices and sharp increases in insurance costs are among other factors that have weighed on buying sentiment. 

This festive season, which typically accounts for 20 per cent of annual sales for makers of passenger vehicles and a third for manufacturers of two-wheelers, has been a dull one. Unlike last year, when key festivals including Navratra, Dussehera and Diwali were bunched in October, this year they were spread over October and November.      

Maruti Suzuki, which sells one in every two cars in the Indian market, has been at the receiving end of the softening demand. The bestsellers Baleno and Brezza have seen stockpiling up at dealerships and discounts increase this year. The average discount on Maruti models has gone up by ~3,600 this festive season as compared to last year, the company’s management told analysts after the September quarter earnings. 

The production cut in October was led by models including the Alto, Wagon R and Ciaz. For the Ciaz, the cut in production has been sharper than the sales drop, indicating the company is correcting the inventory of the model. Sales of the mid-size sedan during the month dropped 5.2 per cent to 3,892 units over a year ago period while production was slashed by 19.4 per cent to 3,513 units in the same period.



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