Maruti Suzuki adjusts production as they witness low demand
Maruti Suzuki, the largest car manufacturer in India, has decided to scale back its production in response to slower than anticipated demand in the Indian passenger vehicle market during the first quarter of the 2024-25 fiscal year. This adjustment comes as dealer inventories have risen to concerning levels, according to a recent update from Suzuki Motor Corporation (SMC), MSIL’s majority shareholder.
The slowdown in sales has prompted broader concerns within the Indian automotive sector. The Federation of Automobile Dealers Associations (FADA) has reported that its members are currently holding around 7,30,000 unsold vehicles, which is sufficient to cover more than two months of sales. This figure contrasts with estimates from the Society of Indian Automobile Manufacturers (SIAM), which suggests that the inventory might be closer to 4,00,000 units.
SMC indicated that the Indian automotive market typically experiences a slower first quarter compared to the rest of the year. However, this year’s decline in demand has been more pronounced, partly due to factors such as the upcoming Lok Sabha elections and adverse weather conditions, including heavy rainfall and heatwaves. To address the rising inventories, Maruti Suzuki is adjusting its production levels and monitoring demand trends closely, especially with the onset of the festival season, which is expected to drive higher demand.
During the first quarter of 2024-25, Maruti Suzuki’s production saw a 7.4% year-on-year increase, reaching 4,96,000 units. However, sales only rose by 1.2% to 4,27,000 units. Despite the production cut, MSIL maintains a dominant 40% share of the Indian car market.
SMC remains cautiously optimistic about the overall growth prospects for the year, projecting a 2-3% year-on-year increase in car sales, supported by potential government measures in the latter half of the fiscal year. Retail sales showed some improvement in July, compared to the April-June period, with a modest 3% year-on-year increase from April through July. Nevertheless, the company acknowledges the need for continued inventory adjustments and emphasizes the importance of stimulating demand during the upcoming festival season, which starts in late August and extends through to Diwali in October.
Maruti Suzuki’s senior executive officer for marketing and sales, Partho Banerjee, stated that the company currently holds 38 days’ worth of inventory and does not plan to reduce this further, as it is deemed sufficient to meet the expected demand during the festival season, which includes major events like Onam, Ganesh Chaturthi, Navratri and Diwali.
Earlier in the year, SMC had forecasted a 2% year-on-year growth in Indian car sales, with expectations that Maruti Suzuki would outperform the broader market. Despite the current uncertainties, SMC has reiterated its full-year outlook, given the potential for demand fluctuations in the coming months.
In financial terms, SMC’s revenue from its Indian car sales for the first quarter of 2024-25 amounted to $3.86 billion, representing 42.7% of its global revenue. The company’s net profit saw a significant 56% year-on-year increase to $0.78 billion, largely driven by strong performance in markets such as Japan and Europe.
