Maruti Suzuki to phase out diesel cars as stricter emission norms kick in

Diesel cars account for almost a third of sales

Maruti Suzuki India Ltd said on Thursday it would stop making all diesel cars beginning April next year and forecast a weak rate of growth for the current fiscal year, blaming uncertain fuel prices and the onset of stricter emission norms.

Carmakers will need to invest in upgrading their technology, including for diesel cars, to meet India's stricter emission norms that come into effect next year.

"From April 1, we will have no diesel car on sale. Depending on how customers react... if we find there is a market for diesel cars (after the new emission norms kick in) we will develop it in a reasonable amount of time," Chairman R. C. Bhargava told reporters at a press conference in New Delhi.

The country's biggest automaker, majority owned by Japan's Suzuki Motor Corp, said it expected production and sales to grow between 4 percent and 8 percent for the financial year started in April.

Last year, the company targeted a 10 percent rate of growth for sales but actual sales grew by just 6.1 percent, the company said in a statement.

While Maruti Suzuki's growth forecast is in sync with the broader industry outlook, high levels of discounting by Maruti had resulted in "disappointing" quarterly margins, said analyst Ashutosh Tiwari of Equirus Securities in Mumbai.

"It looks like the (margin) trend will continue this year," Tiwari said. Maruti Suzuki saw fourth-quarter EBITDA margins falling to 10.8 percent from about 12.5 percent in the same quarter last year. EBITDA margins for the year fell to 14 percent from 15.9 percent a year ago.

The carmaker said it sold 458,479 vehicles in the three months ended March 31, down 0.7 percent.

The company, which helped raise car ownership in India nearly four decades ago with its iconic Maruti 800 model, has since also added cars like the Baleno and Alto hatchbacks.

However, Maruti Suzuki saw negative sales growth in urban markets, Bhargava said.

Growing use of app-based cab services such as Ola and Uber Technologies Inc, tighter credit and market uncertainty ahead of India's general election have all weighed on the auto industry, hurting sales of private cars.

This has spurred a fierce battle for market share, forcing companies to introduce heavy promotions to lure buyers.

Maruti Suzuki's net profit for the fourth quarter beat market expectations but fell 5 percent to 17.96 billion rupees ($256.10 million) from a year earlier.

The results compared with the 17.47 billion rupees average of 22 analysts' estimates compiled by Refinitiv Eikon. Total revenue from operations rose 1.4 percent to 214.59 billion rupees. Maruti Suzuki shares closed down 1.59 percent. The shares touched a more than three-week low earlier in the session.