Maruti Suzuki Q2 profit sinks by 39 pc to Rs 1,359 crore on weak sales

Maruti Suzuki India on Thursday reported a net profit of Rs 1,358.6 crore for the second quarter of current financial year (Q2 FY20), down by 39.4 per cent compared to the same period previous fiscal due to weak auto sales amid slowdown in the economy.

The lower sales volume, higher sales promotion expenses and higher depreciation expenses were partially offset by cost reduction efforts, higher fair value gains on invested surplus and reduction in the corporate tax rate.

The country's largest car manufacturer sold 338,317 vehicles during the quarter ending September, lower by 30.2 per cent year-on-year. While sales in the domestic market stood at 312,519 units, lower by 31.4 per cent, exports were at 25,798 units.

During the quarter, the company registered net sales of Rs 16,120 crore, lower by 25.2 per cent compared to the same period of the previous year.

Maruti Suzuki said the results have to be viewed in the context of exceptionally weak demand environment. The automobile industry has seen a significant decline in sales this year due to several factors.

"One of the main factors is an increase in the cost of acquisition of the car due to various reasons coming together like the implementation of more stringent safety and emission (BS 6) norms, increase in vehicle insurance expenses and hike in road taxes in many states," it said in a statement.

Along with this, the lower availability of finance and increased down payment requirement have affected the affordability of customers to own cars.

In the first half of the current fiscal (April to September 2019-20), the company sold a total of 740,911 vehicles, lower by 24 per cent compared to the same period of the previous year. Sales in the domestic market stood at 6.87 lakh, lower by 25.3 per cent while exports were at 53,911 units.

The company registered net sales of Rs 34,856 crore in H1, lower by 19.6 per cent compared to the same period the previous year. Net profit for the period stood at Rs 2,794 crore, lower by 33.7 per cent compared to H1 FY19.