Maruti Suzuki India Limited (MSIL) expects a slow sales recovery for the Indian automobile sector in the next fiscal year.
India’s largest carmaker forecasts a slow recovery for the auto industry. According to Maruti’s latest projections, the company expects a 6% increase in car production in the fiscal year 2021. Although the number seems low, it should be noted that Maruti has had a sharp decrease in production this year, owing to the poor demand in the current market slowdown.
Maruti expects a slow recovery for the market
The projections listed above were a part of Maruti’s annual internal estimate. The company had a massive production drop of 13.5% between April 2019 and February 2020, with a total output figure of approximately 1.46 million units, while sales figures were calculated at 1.33 million units. As for the next year, the company expects a production increase up to 1.75 million units in total. As per these estimates, it doesn’t seem like the company is hoping for a significant recovery in the automobile sector anytime soon.
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There are several contributing factors to the poor projected estimates. First is the ongoing sales slowdown in the Indian auto market. People have been reluctant to buy new cars nowadays, and the majority of what sells comprises of SUVs. The lack of popularity of other passenger cars has hit all major car manufacturers, although newer entries in the market (read Kia) have been enjoying contrasting success compared to others.
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The second factor is the transition from BSIV to BSVI emission norms. There is a huge stockpile of BS4-compliant cars at many dealerships, and customers are largely reluctant to buy older cars. The second reason is the poor condition of the financial market that has affected banks and NBFCs. Loans are now both, harder to get and offered with high interest rates. The fourth reason is the recent coronavirus (Covid-19) outbreak. Production has largely been affected all around the globe, affecting even major companies like Tesla. In India, manufacturers had earlier stated that production would remain unaffected by the virus outbreak, although that is certainly not the case. Sales have also been heavily affected by the same.
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The estimates by Maruti are only initial assumptions. These projections might further decrease as the year passes and we observe and analyse the market trends down the line.