“The industry is not optimistic about growth next year and the growth projections for the next year are virtually at stagnation levels. That’s partly because of the de-growth in the small car segment,” R.C. Bhargava, chairman, Maruti Suzuki India, said in a call with reporters to discuss quarterly earnings.
Passenger vehicle sales in India have been growing at a fast clip since the last three years. In FY23, sales scaled a record high of 3.8 million vehicles and is projected to grow at 5% this fiscal.
Bhargava’s comments come in the backdrop of a 55% drop in Maruti’s mini car sales to 32,150 units in the September quarter. This contrasted with a sharp growth in the company’s UV sales in the same period. UVs comprised 37% of Maruti’s total sales in the domestic market during the quarter. UV sales in the three months ended September advanced 117.5% to 180,066 vehicles from a year earlier.
A greater mix of UVs drove Maruti’s revenue and net profit to record level, making it the best-ever quarter for the company. Bhargava said the current momentum witnessing India’s passenger vehicle market is unlikely to be sustained if the small car market remains depressed.
A slew of regulatory changes on emission, safety and insurance have made small cars – those priced below Rs10 lakh – unaffordable and that is unlikely to change unless the income levels grow faster than the car prices, Bhargava said. “Our market has become a bit distorted because of the disproportionate impact of regulatory changes,” he said.“The demand seems to be slowing. A sustained demand over a period will require the small car market to revive. Something has to happen, otherwise even a 6-7% growth will not be possible,” said Bhargava. Maruti pulled the plug on models such as the Alto 800 not on its own but because there was a drastic fall in demand, he added.Bhargava pointed out that for the segment to revive, the customer’s purchasing power needs to be restored. “The growth of the economy, GDP per capita income—will take care of the erosion of the purchasing power. The income needs to go faster than the cost of the car, that’s the only way small cars will revive.”