Maruti Suffers, while Hyundai celebrates

Friday 09 September 2011, 13:12 PM by

As Hyundai experiences a profitable August with its car sales going up, Maruti Suzuki’s performance is still at the back seat. Maruti's total vehicle sales declined by a staggering 12.74% to 91,442 units in August 2011 compared to the previous year. The company said in a statement that the hindrance in the production operations at company's Manesar plant has severely affected the number of car sales for the month of August. The sales figures of the company in the domestic market dropped by 16.82%, which accounts for 77,086 units. However, the export of its cars increased by 18.48% to 14,356 units. The major reason that contributes to the abysmal performance in August is the ongoing unrest that has shown no signs of ceasing till now.

In the beginning of this week, Maruti stopped the production process at its plant in Haryana after it suspended and dismissed some workers and asked the rest of the work force to sign a ‘good conduct bond’. The situation was so tense that the plant, which produces about 1200 cars a day, did not have any output on Monday and Tuesday with just 60 cars making it to the stage of completion on Wednesday.

Maruti Suzuki, 54.2% of which is owned by Japan's Suzuki Motor Corp, does not expect a miracle to happen and thus, convey that only single-digit sales growth can be achieved this fiscal year. What makes it worse is the fact that the company achieved a 25% rise in sales last year. Total car sales of Maruti Suzuki in India came crashing in July with a downfall of 16%. The month of July marked the first drop in the time span of last two and a half years. The main reason for the decline in sales was an increase in the borrowing costs which led to multiple rate hikes by the central bank.

On the other hand, South Korea's Hyundai Motors and Kia Motors, which is owned by Hyundai itself, kept up the good work with global sales rising by 5%. The increase in sales was due to the plethora of shipments from its foreign plants in China, India and the United States. Kia Motors outperformed its parent company by taking its global sales to an all time high of 27%, albeit its domestic sales underperformed.

However, according to analysts, the Korean car maker may not find it that simple to maintain the current trend, as uncertainties may grip the global economy. The price control techniques being undertaken by Japanese rivals can also be an ambush. Park In-woo, an analyst at LIG Investment & Securities said that, "The market expected solid sales for Hyundai and Kia for August. What's important are their sales in the coming months. Hyundai and Kia have comfortably increased market shares and profits, but competition will be tougher next year with new model launches (by Japanese rivals)."

Thus, the present time is proving to be quite different for Maruti and Hyundai. However, the struggling Maruti camp is confident that the phase will be dealt with extreme caution to ensure that further adversities are kept at bay.

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