Maruti may offer more discounts this quarter in a bid to push sales

Maruti Suzuki, India’s biggest car maker that beat the street with 18% rise in first-quarter net profit, sees outlook under pressure as interest rates and fuel prices continue to surge.

Commenting on increase in repo rates by 50 basis points, Ajay Seth, chief financial officer of Maruti Suzuki, said on an earnings call, “The outlook continues to remain sluggish as interest rates are rising. This is going to impact buying sentiments.”

“We are hoping that the festival season starting from Rakshabandhan will trigger the sales,” he said.

Maruti on Tuesday reported a net profit of Rs549 crore for the first quarter ended June 30, up from Rs465 crore a year earlier. Sales climbed 3.3% to Rs8,320 crore.

“Higher commodity prices and foreign exchange volatility put pressure on margins as compared to the same period previous year. The market was sluggish, mainly due to a sharp increase in fuel prices and higher interest rates,” the company said in a statement.

It offered a host of discounts to maintain the sales momentum during the quarter.

“The range of discounts during the quarter was higher than the previous quarter but lesser than year-ago period. Volumes have not grown significantly during Q1, hence range of discounts is likely to go up in Q2,” said Seth.

The company has a few refreshes in pipeline this year. Maruti is planning to launch the all-new Swift sometime next month.

According to the company, the production of the previous Swift has already been stopped. “We are currently ramping up the capacity for the new Swift at our Manesar plant. To start off we will produce 15,000-17,000 vehicles a month,” said Seth. The company has already received 30,000 orders for the new product.

Considering the increase in demand for diesel vehicles, the company is also looking at ramping up diesel engine capacity. It currently manufactures two-and-a-half lakh diesel engines per annum, which it plans to increase up to 2.9 lakh in two months.
Diesel cars contribution to the company’s domestic sales rose to around 21% in June quarter from 19% in the preceding one.