Maruti Suzuki annual sales slump 12.3% in CY19, worst in a decade

Maruti Suzuki India ended 2019 with a drop of 12.3 per cent in its annual sales. The fall, the steepest in almost a decade, came on the back of poor economic growth and a slowdown in overall consumption. India’s economy grew at an anaemic 4.5 per cent in the September quarter, the lowest in five years.
 
Entering 2020, Maruti is optimistic, even as it remains cautious of the disruptions expected in the next couple of months, ahead of the implementation of BS-VI and high cost of ownership, said a top executive of the company.
 
During the year, the maker of the bestselling Baleno and Brezza, saw its sales volumes contract to 1.6 million units in the domestic market, from 1.8 million units a year ago, according to Bloomberg. This is only the second time that the local arm of the Japanese firm has seen sales drop in 12 years. Maruti’s sales skidded 8.1 per cent to 1.1 million units in 2011, from 1.2 million a year ago. 
 
“2019 was quite challenging. Going forward, there are reasons to be cautious as well as optimistic,” said Shashank Srivastava, executive director, marketing and sales. A reduction in finance rates and an uptick in rural sales are positives, he said, adding a low dealer inventory will aid sales.
 
He, however, cautioned that the cost of ownership is expected to remain elevated this year. This, in turn, could be a deterrent. He said sales might stabilise in the months subsequent to BS-VI. Launch of petrol BS-VI variants of the Brezza and S-Cross will also bump up Maruti’s sales.
 
Meanwhile, Maruti is betting big on CNG models to fill the void that gets created after it discontinues production of diesel cars from April. It expects sales of CNG models to get a boost if the government cuts the goods and services tax (GST) rate on such vehicles.
 
A slew of policy changes, increase in the cost of ownership which came on back of higher insurance premium, increase in road tax, and a liquidity crisis weighed on buyer sentiment. Confusion over the switch to BS-VI and talks of a possible reduction in GST rate on auto also prompted buyers to postpone purchases, said Srivastava. A deacceleration of the economy also added to the woes, he said.
 
“All adverse factors acted together in 2019,” said Mitul Shah, analyst at Reliance Securities, pointing out that the headwinds would continue for the next couple of months till BS-VI takes effect.