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Recovery blues: Despite growth, Maruti Q2 revenue, profit lower than Q2 FY19

The company says it has seen a shift in preference towards entry level hatchbacks as a section of the market is buying cars to avoid using public transport as a means of prevention from contracting the coronavirus

twitter-logoSumant Banerji | October 29, 2020 | Updated 23:13 IST
Recovery blues: Despite growth, Maruti Q2 revenue, profit lower than Q2 FY19
During the first half of the fiscal, the company sold a total of 469,729 vehicles, lower by 36.6 per cent compared to last year

After registering its first ever quarterly financial loss in the first quarter of this fiscal, India's largest carmaker Maruti Suzuki swung back into black back in the second quarter but its performance was still a far cry from two years ago.

The company reported net sales of Rs 17,689.3 crore , a near 10 per cent growth over Q2 2019-20, and net profit of Rs 1,371.6 crore, 1 per cent more than last year. It was, however, on the back of low base as 2019-20 was a particularly bad year for the domestic automobile industry. In comparison, the company had registered net sales of Rs 22,433 crore in Q2 2018-19 (21.14 per cent more than Q2 2020-21) and net profit of Rs 2240.4 crore (38.77 per cent more than Q2 2020-21). In a year when the pandemic has caused widespread disruption, getting back into black would inspire some confidence but it is still well off its peak performance. The carmaker, for example, said it sold around 85,000 less cars in the said quarter compared to Q2 of 2018-19.

Also Read: Maruti Suzuki Q2 results: Profit flat at Rs 1,372 crore, sales up 10%

"The first quarter was unprecedented for everybody as the lockdown meant we could not even produce and sell cars, so compared to that of course the second quarter performance is very good. Even the second quarter of last fiscal was very bad as sales for us had declined by 16 per cent for the entire year and 18 per cent for the industry. Compared to that we have grown a bit, which is good but not unsurprising," says R C Bhargava, chairman, Maruti Suzuki India Ltd.

"If we were to compare our performance from Q2 of 2018-19 then we sold 85,000 less cars in the last quarter. So, we still have that much ground to cover. That is not taking into account the growth that we aspire normally every year and every quarter, so if we take that into context then we should have sold about 530,000-540,000 vehicles in the quarter compared to just 370,000 that we managed to sell this year," he adds.  

The company sold a total of 393,130 vehicles during the quarter, higher by 16.2 per cent compared to the same period last year. Sales in the domestic market were 370,619 units, higher by 18.6 per cent.

The company says it has seen a shift in preference towards entry level hatchbacks as a section of the market is buying cars to avoid using public transport as a means of prevention from contracting the coronavirus. For October, it has forecast matching the sales from last year which had the twin festivals of Dussehra and Diwali in the same month. In November, it foresees better sales compared to last year as Diwali this year is during that month but said there is uncertainty on whether momentum will sustain from January 2021 onwards.

"This month has been good and next month too sales would be decent. In December, all manufacturers push sales through offers and discounts so I do not foresee a problem during that month either. It's from January onwards that we do not know if there will be a slump in sales or whether the momentum will continue," Bhargava says. "Right now, we are able to sell whatever we can produce so there is no need for a GST cut on cars immediately. If it happens now, there could be a situation when demand will outstrip production and we will not have cars to sell. Any stimulus should come next year when we have some clarity on the demand situation."

During the first half of the fiscal, the company sold a total of 469,729 vehicles, lower by 36.6 per cent compared to last year. In the domestic market sales were at 437,646 units. Maruti's net sales during the six-month period was at Rs 21,366.8 crore, lower by 38.7 per cent compared to last year while net profit was at Rs 1,122.2 crore, lower by 59.8 per cent over last year.

Also Read: IndiGo Q2 results: Loss widens to Rs 1,195 crore, revenue plunges 65%

Also Read: 'Rs 1 crore fine or 5-year jail': Punishment for Delhi air pollution

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