Maruti ‘cautiously optimistic’ on auto industry turnaround

Nandana James Mumbai | Updated on December 11, 2019

Shashank Srivastava, Executive Director - Marketing and Sales   -  Bijoy Ghosh

Will have to watch consumer behaviour after price hikes, says Shashank Srivastava

Done with the festival discounts and ahead of the price hikes that various players plan to implement in the coming quarters, the automobile industry will have to wait before it concludes whether there has been a turnaround, said Shashank Srivastava, Executive Director - Marketing and Sales, Maruti Suzuki.

“We are cautiously optimistic; optimistic because of the good results in October and November combined, but very cautious as well.

“(This is) because the factors which led to the decline in the industry — like the high cost of acquisition, the finance norms being tightened as far as lending to both dealers and retail is concerned, and the confusion surrounding the BS-VI transition. Those factors still prevail in the industry. So it’s not as if they have gone out,” Srivastava told BusinessLine.

What has changed is probably the improved sentiments owing to the festival season and the high discounts during the period. Sentiments play a big role in car acquisition decisions, since it’s a discretionary purchase, he added.

In line with the improved retail sales during the period, Maruti increased its production in November by 4.33 per cent, after having reduced it for nine months straight earlier.

Production plans

“Going forward, you will have price hikes. At the same time, without these high levels of discount (during the festival season), how the consumer will behave once the prices go up...that’s something we have to see before we conclude whether the industry has seen a turnaround,” Srivastava said. Accordingly, the company will decide whether or not to make further production cuts, he added.

Apart from Maruti, which is the country’s largest carmaker, its peers are also planning price hikes from the next quarter.

The automobile industry has seen a prolonged slowdown, with passenger vehicles sales plummeting by 17.8 per cent in April-November year-on-year, per data from the Society of Indian Automobile Manufacturers (SIAM).

Rural focus

Maruti will continue to focus on the rural market as the growth there has been higher than the urban one over the past five years, Srivastava said.

In the first half of this fiscal, there was a contraction in both urban and rural areas, but the slowdown in the rural areas was less pronounced, he added.

He attributed this mainly to the good monsoon, which was perceptible towards the latter part of the fiscal. As a result, the contribution of the rural market to Maruti’s sales increased to 39 per cent, against last year’s 37 per cent.

Going forward, network expansion — both in rural and urban areas — and customer satisfaction will form the main pillars of Maruti’s strategy, said Srivastava.

Published on December 12, 2019

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