Maruti lowers sales growth forecast

Maruti Suzuki India Ltd (MSIL), the country’s largest car maker, has had its sales growth target for the current year lowered from the earlier projection of 13 per cent to eight per cent. That would bring sales to 1.18 million vehicles in 2011-12.

A Reuters report from Tokyo on Thursday quoted Osama Suzuki, chief executive officer of Suzuki Motor Corporation, the parent company, saying, “With inflation and other issues, a decision was made to lower the sales growth forecast. I personally think a five per cent rise would be about right.”

MSIL sold 1.13 million vehicles, posting growth of 30 per cent, in 2010-11. The company had a market share of about 45 per cent. If one assumes the passenger vehicle segment would grow at 14-16 per cent (the revised forecast of Siam, the Society of Indian Automobile Manufacturers), at a growth rate of eight per cent, MSIL's market share would fall to around 42 per cent this year.

Rising interest rates and high fuel prices have been taking a toll on automobile companies over the past two months. After recording a scorching growth rate of 29 per cent in 2010-11, the passenger car industry slowed to a 20-month low at seven per cent growth last month. Auto makers sold 158,817 cars in May, compared with 148,425 units in the year-ago period.

MSIL reported four per cent growth in domestic sales at 93,519 units. But its bread-and-butter compact car segment, sensitive to fuel prices and interest rates, reported a fall of three per cent.

A senior executive said, “Rising interest rates and increase in the price of petrol have made consumers defer purchases, specially at the entry level. The conversion rate in the industry has come down to 15 per cent from the earlier recorded 20 per cent.”

Siam has revised its yearly growth forecast for passenger vehicles from 16-18 per cent to 14-16 per cent. This, it says, is subject to further change if the situation does not improve. Car makers agree. MSIL had, earlier this month, said even this may not be achievable. Passenger vehicle sales have risen 11 per cent in the past two months. For the target to be met, the growth has to be over 18 per cent in the remaining months of the year. This, say officials, is difficult.

Maruti Suzuki shares closed at Rs 1099.8 a piece, down by 1.7 per cent on the Bombay Stock Exchange.