Mumbai: Maruti Suzuki has firmed up plans to post yet another year of double-digit growth, with forecast of good monsoon, upcoming salary increase to government employees as well as softening fuel prices and interest rates boosting its expectations.
The strong outlook from the manufacturer of one in every two new cars sold in India will be a confidence booster for the country’s automobile market. Just a few days ago, industry body Society of Indian Automobile Manufacturers cut its forecast on fiscal 2016-17 auto sales growth to 6-8% from the previous estimate of 11-12%, blaming policy uncertainties, especially over diesel vehicles, that it said created a challenging market environment.
Last fiscal year, double-digit growth at Maruti helped the overall passenger vehicle market expand 7%. Excluding the company’s numbers, the market growth was just 2-3%.
Maruti is budgeting for a total output of 1.55 million to 1.57 million units, with it planning for a 9% increase in production and about 10-11% growth in domestic sales in the fiscal year that began this month, several vendors who have been informed of the company’s plans told ET.
Typically, carmakers share year-ahead production plans with parts suppliers so that they can keep pace with the production schedule.
In Fiscal 2015-16, its total sales, including exports, rose 10.6% from the previous year to nearly 1.43 million vehicles. Sales in the local market increased 11.5% to a record 1.3 million units. The previous year, too, it posted double-digit expansion in sales.
A Maruti spokesperson refused to comment on the forecast, saying: “As a policy, we do not give any forward looking guidance.”
Maruti currently has an optimum installed capacity of 1.5 million units. To meet the new target, which exceeds this, it is likely to generate additional volumes through capacity enhancement at the existing plants. It is also factoring in fresh volumes coming out of the Gujarat factory, being set up by Japanese parent Suzuki Motor and which is expected to go on stream in January next year.
If Maruti achieves its target of 10-11% growth, the company will close the just started fiscal year with volumes of 1.43-1.44 million units in domestic sales, breaking the sales record for the third straight year.
The company’s confidence stems from outstanding bookings of more than 55,000 for the premium hatchback Baleno and about 40,000 for the newly launched compact SUV Vitara Brezza.
The company is, in fact, unable to produce more due to capacity constraints, which people in the know said Maruti Suzuki will address this year.
The company posted its decade-high market share in cars at 52.7% in fiscal 2016. Its share of 46.7% in the overall passenger vehicle was the highest in seven to eight years.
Despite the volatile times, Maruti’s products and operations are fairly de-risked to sustain the growth momentum, said experts.
Gaurav Vangaal, senior analyst for forecasting at IHS Automotive, said his firm is forecasting high single-digit growth in production at Maruti this fiscal year.
He says with hybrid and CNG cars finding favour in National Capital Region to overcome odd-even scheme, expected higher off take amongst government employees due to benefits of 7th Pay Commission, strong export demand and favourable monsoon forecast may result in improved sales in rural areas along with new products, Maruti should sustain the momentum.
However, Vangaal cautioned that the diesel cess, as hinted by the Supreme Court to discourage people from buying diesel vehicles that are seen as more polluting, may prove to be a spoil sport, if implemented. Maruti will have to prepare to address that as it has been investing in significant resources on a diesel engine portfolio, he said.
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