India's largest automobile manufacturer, Maruti Suzuki India Limited (MSIL) has been going through tough times in the past couple of months in terms of its sales. The company itself expects sales growth rate for the fiscal year to be low in the coming future as the Indian automobile market struggles to cope with rising interest rates and fuel prices.
In this regard, the MSIL Managing Executive Officer (Marketing & Sales), Mayank Pareek told Press Trust of India (PTI) that, “Growth is very low this time... During festive season, we are expecting some boost in sales. However, due to huge base in last year, growth will be less. For the whole fiscal, we are expecting low single digit growth".
Moreover, the total sales of MSIL declined by 7.1% in comparison to last year. The company dispatched 356,826 units in the April-July period this fiscal as compared to 384,181 units in the same period a year ago. The domestic sales have also decreased by 4.7%. This year in the April-July period, the number of units dispatched was 317,187 units, in comparison to 333,001 units in the corresponding period of the last fiscal year.
The rising fuel prices and the high interest rates have contributed towards the decrease in the purchasing power of the Indian customers to a huge extent, resulting in lower sales. Furthermore, the recent strikes in the Manesar plant may have also played a role in the drop in sales.
In regards to the decreasing purchasing power of the customers, Mayank Pareek said, ''About 26% of our existing customers have home loans. So they defer exchanging their cars if there is a rate hike, which severely impacts the EMIs of their loans. Every month about 90,000 customers come to the company's service centres and MSIL is contacting them to exchange their cars for new ones. We are giving them more offers", but declined to get into the details of the offer.
The increasing fuel prices have compelled potential car buyers to choose diesel cars instead of petrol variants. According to a recent study, car buyers are demanding petrol and diesel cars in the ratio of 70:30, in favour of diesel cars. Due to this, the company has changed its existing business strategy of exporting diesel engines to Hungary. In this regard, Mayank Pareek said, "We are reducing on export of diesel engines significantly to cater to the domestic demand. Currently we export about 35,000 to 45,000 units every year to Hungary. We will reduce it to almost negligible levels in the next six months”.
MSIL has the New Maruti Swift 2011 lined up for launch this month and the company expects a good response from Indian customers. This demand has to be met by an equal increase in the production of the diesel engines in the Manesar plant. The present capacity of this plant is 2.8 lacs, which need to be increased to about 4 lacs to meet the growing demands of the Indian market. In relation to this, MSIL Managing Executive Officer (Marketing & Sales) said, "The additional engine that we get (after cutting exports) will go for the Swift in India".
