Maruti Expects Production Activity To Pick Up In Q4 As Chip Supply Improves

The country’s largest carmaker Maruti Suzuki India is expecting production activity to improve in the current quarter with gradual improvement in the supply of critical electronic components, a senior company official has said.

The auto major is also looking at ways, including bolstering its SUV portfolio, in order to get back to 50 per cent market share in the domestic passenger vehicle segment in the years ahead.

The company’s cumulative market share currently hovers around 44 per cent as it continues to struggle in the mid-size SUV segment, which has been growing at a fast clip.

“An estimated 90,000 vehicles could not be produced during the third quarter owing to the global shortage of electronics components mostly corresponding to the domestic models. Though still unpredictable, the electronics supply situation is improving gradually. The company hopes to increase production in Q4, though it will not reach full capacity,” Maruti Suzuki India (MSI) CFO Ajay Seth said in an analyst call.

At present, MSI has a cumulative production capacity of around 5.5 lakh units per quarter or about 22 lakh units per annum across its manufacturing plants in Haryana and Gujarat.

Seth noted that during the October-December quarter, the company continued to experience a shortage of electronic components, especially during the festive period, when the demand for cars usually remains good.

“The enquiry, bookings and retail sales in the third quarter have shown an improvement sequentially. Enablers such as finance availability and interest rates continue to remain favourable,” Seth explained.

Elaborating on the production scenario, MSI Senior Executive Director (Sales and Marketing) Shashank Srivastava stated that the situation has improved gradually from September last year when the company could only roll out 40 per cent of its manufacturing target.

“The situation in that sense is improving. However, it is still not 100 per cent as you can see, and we are hopeful in January, February and March, we will continue to see this improvement hopefully to be above that 90 per cent mark…we may not reach 100 per cent,” he stated.

Srivastava further said: “When we will reach 100 per cent is actually not clear at the moment because we cannot take a definitive view on that because it’s a very complex supply chain, which is involving not just Maruti Suzuki but all OEMs in India and not just India, but across the globe.”

On a query related to the market share, he noted that it would be difficult for the company to go over the 50 per cent mark by the end of this fiscal due to production constraints.

“So if you look at the figure for December, the market share for wholesale was 48.3 per cent and for retail it was 49.9 per cent, very close to the 50 per cent mark. However, if you look at the cumulative figures so far for the year, the market share is just around 44 per cent. So, I think judging by that, it does appear that while December market share is close to 50, cumulatively it might be difficult to reach that 50 per cent at the end of the year given the current production scenario,” Srivastava said.

However, in the years forward, it is still quite feasible for the auto major to target 50 per cent market share, he added.

Srivastava noted that the company continues to lead in the hatchbacks, MPV and van segments and it is only in the mid-size SUV segment that it lags behind the competition.

“If you look at our market share up till December, for hatches it is 67 per cent. If you look at the passenger cars, it is 62.5 per cent. If you see the MPVs where we have the XL6 and the Ertiga competing against Innova, Triber, etc, it is 64 per cent and for the vans it is 95.6 per cent. So obviously in all these segments, the company’s market share being above 65 per cent or thereabouts. It’s the SUV space which has pulled us down,” he stated.

In the entry SUV space, the company leads with the Vitara Brezza, Srivastava said.

“We have a weakness in the mid SUV segment currently. And we hope to address it going forward by expanding our portfolio in this very critical category,” he noted.

On the alternate technologies, Srivastava said that given the high upfront cost of batteries and the limited charging infrastructure network in the country, the automaker is of the view that at least for the medium-term hybrids will be a very powerful solution.

“They are scalable, they do about 40 per cent of the job of an electric vehicle (EV) in terms of CO2 reduction, in terms of energy efficiency, but they’re probably 100 times scalable. So in the medium term, they will be a good option. And of course EVs also have to be pursued for the long term. So all options have to be worked upon,” he stated.

On the company’s current order book, he said that the automaker was sitting on a backlog of around 2.6 lakh units with CNG units comprising 1.17 lakh units.

Shivam is one of those gen X kids who wish the world was different. Shivam enjoys surfing the internet without any motive. He reads a lot and loves working on unique projects.

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