Maruti Suzuki, hit by automobile sector slowdown, reports lowest profits in 4 years

The festive season sales may not be enough to overcome the 39% slump in profit Maruti Suzuki India has suffered since last year.

Newly manufactured Maruti Suzuki cars are seen parked inside the company factory in Manesar near Gurugram | PTI File Photo

New Delhi: Maruti Suzuki India Ltd. posted its lowest quarterly profit since fiscal 2016, caught in the Indian auto market’s worst ever sales slowdown.

• The Suzuki Motor Corp. unit reported net profit of 13.6 billion rupees ($190 million) in the three months ended Sept. 30, down 39% from 22.4 billion rupees a year earlier. That still beat forecasts: analysts on average expected a figure of 10.3 billion rupees, data compiled by Bloomberg show.

Key Insights:

• Profit was driven by a 78% decline in total tax expense to 2.13 billion rupees.
• October, a festive month in India, saw sales improve thanks to “almost the biggest promotion ever,” Chairman R.C. Bhargava told reporters in New Delhi.
• Numbers will be similar to last October, but it is too early to say if the industry is “out of the woods” just because monthly sales improved, Bhargava said.
• The chairman also said Maruti Suzuki won’t sell an electric version of its Wagon R hatchback by 2020, as there’s no government support.
• Car sales in India, the world’s fourth-largest automobile market, fell for the 11th consecutive month in September, forcing the industry to cut production and jobs. Bhargava said last month that footfall was rising “quite substantially” in showrooms, just ahead of the festive season.
• Indian car sales are dominated by cheap, fuel-efficient vehicles made by Maruti and South Korea’s Hyundai Motor Co. Global carmakers have had a tough time making inroads, with General Motors Co. scrapping a $1 billion investment two years ago and Ford Motor Co. transferring most of its assets in the country to a joint venture with Mahindra & Mahindra Ltd.
• The slump in auto sales is primarily due to a slowdown in demand from rural areas, home to about 70% of the population, where people are putting off purchases of everything from shampoo to biscuits as the economy slows. In cities, the rise of ride-sharing apps like Uber has cut into vehicle sales, while some buyers are also deferring purchases until stricter car emission standards are introduced next year.

Market Reaction:

• Maruti shares fell 1.8% to 7,375.10 rupees as of 2:58 p.m. in Mumbai. The stock has remained mostly flat this year, compared with a more than 8% jump in the broader S&P BSE Sensex index.

Get More:

• Maruti, India’s biggest carmaker, sold 312,519 vehicles in India during the quarter, 31% lower than a year earlier. The company’s total sales of vehicles fell 30%.
• India’s Auto Boom Goes Bust on the Worst Sales in Decades
• Maruti Says Sept. Retail Car Sales May Rise 20% Over Aug.
• Car Sales Slump in World’s Fourth-Largest Auto Market: Chart