Maruti slips on weak rural demand

Maruti Suzuki has lost some 150 basis points of market share, leaving it a shade under 51% , with its retail sales falling 17% year-on-year in the April-June quarter. The wholesale volumes for July — less than one lakh units — suggest a further slide in its share to levels of below 49%; in July 2018, the company commanded a share of 52.4%. Unless the consumption slowdown reverses, Maruti’s total volumes for the current year could be about 5% lower than in 2018-19. Analysts also believe the company’s strategy to move out of the diesel space for smaller cars are not prudent.

The last new launch from its stable was the upgraded Hatchback Wagon R in January. In contrast, Hyundai’s Santro, which was relaunched in October, is doing well as is the XUV300 from Mahindra & Mahindra. Both firms priced their products competitively; the Santro, for instance, is available at a starting price of Rs 3.7 lakh while the Celerio is a little more expensive at Rs 4.15 lakh. The XUV 300, which competes with the Creta and Ford Ecosport, is selling in good numbers probably because it is a newer model and is Rs 1.5 lakh cheaper than Creta.

The big worry is that Maruti could give up more share once it withdraws diesel models from its portfolio in April 2020. Diesel cars constitute around 23% of total sales and more than half its range has a diesel engine option. Smaller engines will shift entirely to petrol, CNG & hybrid, given the sharp increase in cost of diesel after BS-VI & RDE. The management expects even fleet sales to shift to CNG or petrol-hybrid over time, based on economics.

Maruti has already transitioned variants of many of its best-selling models — Alto, Baleno, WagonR, Swift and Dzire — to BS-VI with the majority of models expected to shift by the end of CY19. The company has clarified it is still evaluating the BS-VI variant of its 1.5-litre diesel engine, though this is unlikely to be ready by April 2020. The management is less worried and is hoping to see its volumes bounce back in 2020-21.

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Source : newscrab

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