New Delhi/Mumbai: Maruti Suzuki India Ltd. reported the biggest decline in sales in almost seven years as a slowdown in consumer spending, the largest driver of growth in the $2.7 trillion economy, became more pervasive.
Total sales dropped about 34% from a year earlier to 109,264 units in July, according to a statement on Thursday. Deliveries of its hatchback models fell 23%, even as sales of the premium Ciaz sedan jumped to 2,397 units from 48 a year earlier.
The worst drop in sales since August 2012 at the unit of Suzuki Motor Corp. indicates that the slowdown in Asia’s third-largest economy may be worsening, as a lingering credit crisis prompts creditors to go slow on granting new loans. Maruti’s shares are down more than 40% from a record reached last July.
“There has been no improvement in demand for autos,” said Teresa John, economist at Nirmal Bang Equities Pvt. “That means consumption in the economy is still sluggish.”
Read more about the slowdown in consumer spending
The government’s annual budget last month lacked specific measures to help companies, leaving the Reserve Bank of India to do the heavy lifting to boost economic growth from a five-year low. The central bank has cut interest rates three times this year.
The slide in car sales adds pressure on Maruti Suzuki to come up with newer model to take on challenge from rivals including Kia Motors Corp. and SAIC Motor Corp., which recently entered the world’s fourth-largest automobile market. Hyundai Motor Co. has also been eating into Maruti’s market share with new cars.
“Maruti Suzuki also suffers from a stale portfolio,” said Deepesh Rathore, a London-based director at consultancy Emerging Markets Automotive Advisors. “There are limited buyers in the market and they are more inclined to new, exciting products like the Hyundai Venue.”
The company’s shares rose 0.9% to 5,520 rupees at 1:56 p.m. in Mumbai, after tumbling 16% in July.
Passenger vehicles sales fell 18% in April-June over the same period last year, according to lobby group Society of Indian Automobile Manufacturers.
Also read: What’s better for the country—India-based Maruti Suzuki or UK-based Jaguar Land Rover?