Having reached the 2 million milestone in 2023, Maruti Suzuki expects to go to 4 million cars by 2030, says Shashank Srivastava, Senior Executive Officer, Marketing & Sales, Maruti Suzuki to The Sunday Guardian as he flags challenges of interest rates and rural growth.
Q1 After an eventful year, what is the outlook for Maruti Suzuki for 2024?
For the whole calendar year 2023, Maruti Suzuki crossed the sales mark of 2 million units, which I think was a milestone in our journey that we have been wanting. Last year we fell short. So going forward our projection is that we should do the 4 million sales mark by 2030-31. As for the industry perspective, in 2023 we had total sales of 41.1 million. It was the first time that we crossed the 4 million mark.
Two things that came out clearly this year was, first that the number of pending bookings which was there in the industry came down drastically in 2023. During the course of the year the semi conducter crisis sort of went away and therefore we could produce vehicles cars as we wanted from January 2023 onwards. The waiting period for most models also came down.
The industry stock in the beginning of the year was small due to various supply chain constraints and the demand was higher than the supply. These are not there this year – 2024. With the base becoming quite high, my expectation is that the year 2024 should be at good level as the GDP growth is positive for the industry. I would expect on a high base, low growth or a single digit growth for the industry over 2023.
Q2 How have you navigated the market despite challenges?
In 2023, we found that we were under pressure because of the entry segment domination. We had a 70 per cent market share in that segment. There has subsequently been a decline over the years for various reasons including the move towards the SUVs which have become bigger in terms of volumes. In 2023 we could launch good products like the Jimny, Fronx, Invicto.
Although we launched Vitara in September 2022, the full production of the Vitara came in 2023. With these 4 models our SUV market share actually doubled from 10.3/10.4 per cent last year to now 21 per cent this year. In H1FY24 we are the top SUV manufacturer although we were No 4 last year. So that is the one big thing.
The SUVs are now getting bigger and bigger and we could launch the products and get volumes from there. In any case Maruti Suzuki has always been customer centric and that I think has been very positive for MUSL. Coming to the whole fiscal, for the full financial year 2023-24, we are expecting 41.3 to 41.4 lakh units against 38.9 lakh last fiscal. Expectedly the financial year growth will be around the range of 6.3 to 6. 4 per cent.
The SUVs growth should hit the 2 million mark. That is what we are aiming at. Exports are booming. Key export markets for Maruti Suzuki are South Africa, Saudi Arabia, Chile, Ivory Coast, Philippines and our top export models are smaller cars, Baleno, Dzire, Swift. We are present across the globe.
Q 3 So the booming demand for SUVs is driving growth?
You see there are four main reasons for the SUV growth. First is that the driving position is quite upright and it gives a feeling that you are in-charge of the road. That is something that Indians want. Second the SUV is also now associated with a higher status. Third, the ground clearance of a SUV is far higher than a sedan which means on a bad road, it helps to be on a SUV. s can be bad. Fourth, for models like Brezza, Magnite, Sonet, the GST is lower, at 28 per cent.
That has enabled OEMs to have competitive price in the segment. Now even in the premium hatchbacks and entry sedan segment, for consumers the cross configurations with SUVs has increased. More people who were earlier buying hatch and sedans are considering buying SUVs because now there is a price overlap. So SUVs have become more affordable in that sense.
Q 4 The Jimny is a very interesting product. How is it doing and what do you plan to launch next?
The Jimny appeals to a niche kind of customer, a small lifestyle kind of SUV. It does 2000 to 2500 units a month. Not very large but it has a 4 wheel drive and has great off-roading ability. A lot of customers have given us the feedback that the price is on the high and you should bring in the two wheel drive option and not the four wheel drive. We have taken the feedback and the view is that if we bring in a two wheel drive in a Jimny, and consider a lower price, it would probably go against the brand of the Jimny which is about offoading and driving in comfort.
On future products we cant go on specifics but Maruti Suzuki has always been aggressive in terms of product introductions and we have in the last 12 months launched four new products. Going forward we will be upgrading and launching some new products, including the first EV from Maruti Suzuki. It will be sometime in the new financial year, a mid SUV, largish and it has a battery of about 60 kilowatt which means a range of almost 550 km.
Our projection is that by 2030 about 18 to 20 per cent of the Indian market will be EVs. The market volumes will be between 1 million to 1.2 million EVs annually. Right now in 2023, the penetration of EVs was 2.2 per cent.
Q 5 There are stiff headwinds – geopolitically and economic slowdown. What does all this mean for the auto sector?
It is obviously going to be challenging in many ways. Our volumes have become quite large, the 4 million plus so a high growth over a large base may not be possible. That’s why are saying that growth will be muted although the volumes itself would be large. Then there are challenges like for instance the interest rate.
Inflation remains stubbornly high, above the RBI’s official acceptable range of 4 per cent. In any case even the repo rates which has gone up in the past one year upto 250 basis points have not yet been completely built into the auto loan rates. Only 130 basis points have been built in and 120 basis points will come into the picture with a lag. Also remember that 80 per cent of the auto retail happens through financing.
The second one will be in the rural sentiment. What we seen is that while the kharif crop sowing has been sort of normal, kharif output is lower and that is a negative because food inflation can remain high and the rabi crop which is being sown now (happens between November and January) is negative right now. So kharif output might be less and Rabi sowing itself is negative so we can expect Rabi crop also to be negative.
Both can have a negative impact on agricultural output and hence on the rural sentiment and the food inflation. Rural sentiment is a strong component — almost 44-45 per cent of the business. This year the growth of rural vehicle sales has been stronger then the urban.
However, in December we saw an uptick in urban growth. Ratio of sales is roughly urban 68 to 32 rural. For Maruti the rural is a little higher. Third, commodity prices in the last few quarters have been generally benign and of course these are linked to the geo political situation. So we have to watch carefully. Prices of precious metals have come down though steel prices are strengthening.
These are some of the issues and we have to see how it pans out. Global fuel sales is another thing which will depend on the geopolitical tensions. There could be volatility and as you know for the auto industry oil prices are very important.