Maruti Suzuki’s car sales are settling down into more normal growth rates. During the October-December period, sales growth was quite high because of a low base effect, due to a decline in sales in both domestic and export markets.
In January 2010, the car major’s sales rose by 33.3% to 95,649 vehicles. In December, its sales had risen by 50.6%. On a sequential basis, sales are up by a strong 13%.
Higher exports is the main reason for its outperformance, with sales tripling to 14,562 vehicles. Domestic sales rose by 21% to 81,087 vehicles, slower than the 36.5% growth seen in December. But on a sequential basis, sales were higher by 14%.
The fastest growing segment in the domestic market was the C segment, with the company selling 41% more of its minivans -Omni and the newly launched Eeco . The A3 segment –SX4 and D’zire- too did well, with a 36.5% increase in sales to 8,995 vehicles. Its bread and butter A2 segment –Swift, Ritz, A-Star, Wagon R- saw sales rising by 24.8% to 58,540 vehicles.
During the December 2009 quarter, Maruti’s sales rose by 62% to Rs 7503 crore while its net profit rose by 221% to Rs 214 crore. The base effect in its profit growth will be visible in the March quarter too, after which reported net profit will also normalise, just as its volume growth is coming down to more stable levels. Still, the current level of sales growth is healthy for a company of the size of Maruti and expanding volumes will give it more leverage in terms of procurement and extracting cost savings from its component makers.
It does face a few challenges in the near to medium term, prime being an increase in raw material costs which may have to be passed on to customers. A slew of new car launches are slotted for in various segments, whether they expand the market further or lead to a division in the existing pie will determine impact on players. Last, the interest rate trajectory is headed up and any swift increase in interest rates may limit automobile sales.