India’s largest car maker Maruti Suzuki today denied that it was facing problems with demand, and said the recent slowdown in sales is because of availability of semiconductor chips.
Shashank Srivastava, executive director in charge of sales and marketing, denied that the company was facing any issues liquidating its inventory, and said stocks were well below normal.
“The inventory at dealerships is around one week, which is well below the normal level of four weeks. There is practically no inventory at the factory level,” Srivastava said in an interview, a day after the company reported its sales figures.
The comments come on the heels of yet another disappointing performance by India’s largest carmaker in November, with India car sales falling to less than 1.1 lakh compared to the usual figure of around 1.4 lakh.
Srivastava said the problem was not with demand at all, but with the company’s ability to source semiconductor chips, and said Maruti Suzuki still has around 2.5 lakh unfulfilled bookings on its order book.
“Whatever is being produced is being dispatched,” he added.
Maruti Suzuki has been trailing rivals like Tata Motors in sales growth in recent months. It has been consistently under-performing year-ago sales numbers, even as Tata Motors has been reporting year-on-year growth in the range of 25-60% every month for the past several months.
Srivastava said one of the company’s semi-conductor suppliers, based in Malaysia, was impacted by a COVID shutdown, which hurt availability of these chips.
The biggest shortage was felt in September, when the company could only operate around 40% of its production capacity for this reason.
This has been improved to around 60% in October and to around 82% in November, and will likely improve closer to 85%, Srivastava said.
He added that semi-conductor availability is difficult to predict as the same chips are used in a variety of industries such as white goods, mobile phones, telecom equipment and laptops.
At the same time, said Srivastava, Maruti Suzuki is not seeing the kind of slackening of rural demand witnessed by two-wheeler makers.
Hero MotoCorp, India’s largest two-wheeler maker, reported a 43% fall in domestic sales in November due to lower demand from rural markets.
Srivastava said it is possible that the two-wheeler market is feeling the impact of the recent increase in petrol prices, as the segment is sensitive to total running costs. But, he said, Maruti Suzuki is not seeing anything similar.
On the contrary, said he, growth in rural has been better than from urban markets this year.
He said he sees “good prospects” from the rural markets this year as the procurement season is underway and the winter crop has seen good sowing.
The company has also seen strong exports this year, with the first eight months alone breaking the previous full-year record as exports are concerned. The company has exported 1.47 lakh vehicles as of November, which is higher than its previous full-year record set three years ago.
PRICING PRESSURE
Srivastava also said the company is facing enormous pricing pressure due to the recent run-up in commodity prices, such as those of steel, which has nearly doubled in price in recent months.
Maruti Suzuki has already implemented three price revisions — 1.4% in January, 1.6% in April and 1.9% in September.
Still, he said, the impact of raw material price increases has not yet been fully passed on to the consumer.
Asked if December will see another round of increase, he said the company is definitely facing pricing pressure. “We will take a decision on it in a short period of time,” he said.