Unavailability of labour force will impact production, says Maruti Suzuki

The company reported a 28 per cent year-on-year decline in its net profit for January-March period largely because of tepid demand for its cars worsened by more than a month of long lockdown
India’s largest carmaker today said that the return to normalcy will take time as it solves issues regarding scarcity of labour and alignment of production adhering to social distancing measures.

“There is too much of uncertainty currently to predict when there will be a recovery,” R C Bhargava, Chairman at Maruti Suzuki, said highlighting that a substantial size of workforce has gone away to villages impacting production.

“It’s not easy to get back the manpower which have gone back. The new social distancing protocols also reduces productivity to an extent,” Bhargava said when asked about the time it will take for the industry to recover.

Manual workers, who mostly hail from Bihar and UPm are at the nerve centre of India’s large manufacturing companies like Maruti, on whom they depend for jobs other than those that require specialised training. Most have left for their villages as the lockdown has brought economic activity to a grinding halt, threatening their livelihood.

The company reported a 28 per cent year-on-year decline in its net profit for January-March period largely because of tepid demand for its cars worsened by more than a month of long lockdown during which there was zero production and sales.

However, Bhargava said that he expects the market to recover by the time festive season. “ Definitely during the festival season, the demand will be higher than what the industry will be able to produce. By that time we will be able to fine tune on how to work with the  the new safety and distancing norms,” he said.

The company's net sales during the quarter declined 17.1 percent to Rs 171,86.7 crore - a result of 16 pe cent decline in total vehicle sales during the quarter to 3,85,025 units.

Operating profit during the period fell 31.7 per cent to Rs 1,546 crore crore while margins contracted 200 basis points to 8.5 per cent due to increase in overall expenses.

Maruti has however, not yet cut back on the planned amount for capital expenditure. The company will invest Rs 2,700 crore for the current fiscal FY20-21. “We have to work for the long term. We have complete confidence in the economy. We can’t afford to miss the capital expenditure this year,” Bhargava said.

The carmaker by virtue of its strong presence in the entry level segment of the market will be the first to make a recovery as people folk to own a car in order to maintain social distancing but will not be able to afford a higher end vehicle as pay cuts and job loss have become rampant. “ Categories such as economy and executive 2Ws, entry-level cars, tyres and batteries should experience a revival in second half of FY21,” said analysts at Dolat Capital.


Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel