Maruti Suzuki saw a sales decline of 16% in Jan-March— investors wait to see the margin squeeze
- India’s largest car maker is set to declare the fourth quarter earnings today (May 13).
- The monthly data showed a sharp decline in car sales in the three months ending March 2020.
- The share price, however, has recovered 23% since April 3 at a time when the company didn’t sell a single car.
AdvertisementIndia’s largest car manufacturer Maruti Suzuki is set to announce its fourth-quarter results today (May 13) for the quarter ending March 2020. Although the coronavirus lockdown period was just for one week in the relevant period, it is already known that the car giant saw a steep 16% decline in sales due to bad market sentiment.
On March 22, the government announced a nationwide lockdown to deal with the COVID-19 pandemic and Maruti to halt operations until May 12 when the Manesar plant reopened.
Analysts had expected its fourth quarter profits to fall anywhere between 18-40%.
Since the beginning of 2020, Maruti Suzuki’s share price has taken a massive hit because of the coronavirus pandemic, subdued sales and shutting down of showrooms and factories.
The share price declined over 31.5% since the beginning of the fourth quarter, till date. The stock recovered over 6% on May 13 as investors cheered the Indian government’s ₹20 lakh crore stimulus package, declared by Prime Minister Narendra Modi, hoping it would turn the downtrend in demand for automobiles too.
It’s not going to get better anytime soon
From the coronavirus outbreak to the BSVI transition, all has brought only further bad news for automakers.
After a year of subdued sales, auto companies in India were looking forward to recovering in 2020. Manufacturers were being forced to up the emission standards to BS-VI by regulators and buyers were waiting for the new models to hit the street. But then came the coronavirus pandemic and as markets shut down across the world, most auto manufacturers reported zero sales in the month of April and drop in sales in March.
Analysts at Kotak Institutional Equities said that the sales volume in the passenger vehicle segment will remain muted through FY21. The report listed two reasons – “weak economic growth due to the coronavirus pandemic leading to negative impact on businesses and decline in diesel segment volumes due to 6-8% price increase owing to the BS-VI transition.”
AdvertisementIn a desperate measure, Maruti is now also offering home delivery of cars. Customers can choose the model, colour and accessories online and the car will be delivered at home. “All staff visiting the customer's home will follow safety protocols – including wearing masks and carrying sanitizers. All cars will be fully disinfected before delivery. In case of delivery from showrooms, limited persons would be encouraged,” said the company’s statement.
Maruti’s plants have been shut since March 25, and now they are slowly revving up again. But 33% of the country is still in the red zone, which means buyers can’t step out. Hence, home delivery.
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Kotak Mahindra Bank's earnings may reflect the pain in India’s auto sector as well as the rising job losses and pay cuts
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