Maruti Suzuki hit by Manesar riots, faces supply woes and slump in market share

Saturday 28 July 2012, 10:47 AM by

Following the violent clash at Maruti Suzuki’s Manesar plant, the largest car maker of the country has come to an edge of production loss, adding to the woes of their monthly supply. Before the riot also, the situation was slipping from the hands of the car maker as the demand for its bestsellers, Swift and DZire, was witnessing a regular surge with waiting periods of over five months.

On the other hand, the car maker has now faced a dip in its market share, with other auto companies taking benefit from the situation. The lockout at Maruti Suzuki’s Manesar unit has been around a long time, which seems that the same clouds of 2011 are surrounding the situation, when the protest by labour resulted in a massive loss for the company.

In 2011, when the production was suffered to a great extent, following the labour unrest at Manesar, the quarterly profits of the company were highly affected. At that time, the strike which remained operational for few weeks, led to the sales of the company dwindle to seven consecutive months during the period. In the last fiscal, the sales of the car maker dipped 11 per cent, which impacted almost 30 per cent of its annual profits.

Industry experts believe that the company will have to face the situation for at least a month with a daily loss of around $15 million in the terms of production. Last year in October, the key festive season of the country, the company witnessed labour unrest, which affected its sales a lot. And this time also the situations are likely to shuffle its entire operations for a couple of months, hampering this year’s festive season also for the Indian auto giant’s performance.

It is believed that the sales in Indian car industry rejoice a surge in the festive season, which is conventionally supposed to be a sacred time to buy new things, including cars.

The auto maker is already suffering from the production loss and adding fuel to its injuries, the investors pulled back their investments worth $700 million from the company’s shares, leaving a slump of over 10 percent since the strife took place at Manesar unit.

An Auto Analyst, Angel Broking, Mumbai commented, “If it takes around a month or so, then the volumes going into the festival season will be impacted, which could bring down the overall volumes for the company ... which was the case last year as well. They cannot achieve full production immediately once restarting the plant.”

With great loss bringing down the position of the company in the Indian auto market, analysts believe that the auto maker should quickly lead upon the whole situation and makes the circumstances favourable for itself.