Maruti expects 11% drop in FY12 sales

Maruti Suzuki India expects its sales to dip by 11% this fiscal due to production losses suffered during the year following repeated incidents of labour unrest at its Manesar plant.

The company, which is mulling over the establishment of a new diesel engine manufacturing plant, said it will take a final decision on the proposal after the Budget.

"In the April-December period this fiscal, we were down 16% from the year-ago period. In January, it has narrowed to 14%. For the whole fiscal, we think our sales will be down by 11% from the last fiscal," Maruti Suzuki India Managing Executive Officer (Marketing and Sales) Mayank Pareek told reporters here.

In the 2010-11 fiscal, the company sold 13.2 lakh units. In the April-January period this fiscal, the firm sold 8,88,794 units.

"This ongoing fiscal has been a really trying year for us. We had lost about 1,06,000 units, which is almost about a month's production, due to the strikes at the Manesar plant," Pareek said.

He was speaking at the launch of the shorter version of the company's entry-level DZire sedan at an introductory price between Rs 4.79 lakh and Rs 7.09 lakh (ex-showroom, Delhi).

"We cannot match what we did in 12 months last fiscal in 11 months of this fiscal," he added.

In 2011, MSI was hit by a labour unrest at the Manesar plant. The first incident erupted in June, which was followed by similar imbroglio in August that lasted till October 1. A third standoff between the plant management and workers occurred in October. The total number of days affected by the labour unrest was 60.

Pareek said although the company has been able to register positive sales in January after seven continuous months of decline, the fundamental weakness in the market still remained.

"Demand for petrol cars still continues to be weak, while those of diesel are still very high. For us, in January, demand for diesel cars increased by 34% while on the other hand, petrol declined by 6%," he added.

With supply of diesel engines from Fiat coming in, Pareek said MSI should be able to sell more diesel cars.

MSI recently signed an agreement with Fiat India to source 1,00,000 units of diesel engines a year from the latter's Ranjangaon facility.

When asked about MSI's plans to enhance its own diesel engine capacity by setting up a new plant, Pareek said: "A final decision will be taken after the Budget."

The auto industry fears that the government may impose additional tax on diesel cars as opposition to "subsidised fuel being used for luxury" gets stronger.