Maruti profit skids 10%, but company remains upbeat despite Covid 2nd wave

Chairman R C Bhargava says local lockdowns and curfews have so far not had any impact on production and retail demand continues to outpace supply

Maruti Suzuki, India’s largest carmaker, on Tuesday said the company was inclined to continue production at scale because it saw no impact on demand despite the raging second wave of the coronavirus.
 
Suzuki Motor, Maruti Suzuki’s parent, recently added an assembly line at its Gujarat factory, and production will increase.
 
R C Bhargava, chairman at Maruti Suzuki, on Tuesday said so far local lockdowns and curfews had not had any impact on production and retail demand continued to outpace supply.
 
“There is a big enough market to sell our products. There is a shortage of supply compared to demand. We still have a large backlog of dealer order books to fulfil,” Bhargava said, adding, the company was not seeing any shortage in the workforce despite sporadic curfews announced by various state governments.
 
“Demand has been consistently steady so far. If this situation continues, it should be a decent quarter for us. There are factors we have to keep on watching. How the pandemic progresses, what kind of restrictions come in, and what impact it will have – these are matters that will determine the remaining part of the quarter,” he said.
 
Maruti Suzuki sold 492,235 vehicles in the March quarter, up 28 per cent year-on-year (YoY).
 
Shashank Srivastava, executive director of sales, said in a post-results call with analysts that the lockdowns in all major Indian metros like Delhi, Mumbai, and Bengaluru would hit retail sales in April.
 
“We are watching how it unfolds but like I always say, auto sales depend on the overall sentiment of the economy,” said Srivastava.
 
Maruti Suzuki reported a 9.7 per cent decline in profit for the quarter ended March 2021, hit by a lower-than-expected operating performance and a sharp fall in other income, though revenue stood strong during the quarter.
 
The decline is a result of the rise in its overall expenses due to an increase in the prices of commodities such as steel and copper. Other income also fell 89.8 per cent due to mark-to-market losses on investments, hitting the bottom line.

 
The company had posted a net profit of Rs 1,291crore in the year-ago period, with sales taking a hit due to economic slowdown and transition to new safety and emission norms.
 
The company is also not reducing its capex for the next financial year.
 
“Our capex will continue as it is,” said Bhargava. However, Bhargava said the carmaker was closely watching the issue of shortage of oxygen.
 
Due to the scarcity of medical oxygen in hospitals, the government recently ordered industrial oxygen to be diverted for medicinal uses.
 
Maruti Suzuki does not use industrial oxygen for production but its vendors, including steelmakers, do make use of the life-supporting gas in manufacturing.