Maruti Suzuki to hike car prices in July-September quarter; stock up 4%

Maruti Suzuki (India) shares rose 4.5 per cent to Rs 7,211.90 on the BSE in intra-day trade on Tuesday after the car & utility vehicles company said it would be raising vehicle prices in the July-September quarter (Q2FY22) to pass on higher input costs. although the quantum of the increase has not been disclosed.

At 10:27 am, the stock was up 4 per cent at Rs 7,190 on the BSE, as compared to 0.91 per cent rise in the S&P BSE Sensex. The trading volumes on the counter more-than-doubled with a combined 644,000 shares changing hands on the NSE and BSE, so far.

“Over the past year the cost of the Company's vehicles continued to be adversely impacted due to increase in various input costs. Hence, it has become imperative for the Company to pass on some impact of the above additional cost to customers through a price rise,” Maruti Suzuki said in exchange filing.

The company further said that the price rise has been planned in quarter 2 and the increase shall vary for different models.

The company has already undertaken price increases of around 2 per cent thus far in calendar year 2021 (CY21) and its latest pricing action could spur similar increases across the passenger vehicle (PV) industry.

Maruti Suzuki India is an automobile manufacturer with a 56.37 per cent ownership in Japanese car and motorcycle manufacturer Suzuki Motor Corporation. It is one of the largest passenger car companies and accounts for over 50 per cent of the domestic car market.

Maruti Suzuki's stock has been underperforming the market on account of losing market share. Despite today’s gain, in the past three months, the stock up just 1 per cent, as compared to 6.6 per cent rise in the S&P BSE Sensex. In the past six months, it was down 3 per cent, against 15 per cent rally in the benchmark index.

In the January-March 2021 quarter (Q4FY21), Maruti reported a weak performance as profit after tax of Rs 1,170 crore, down 10 per cent year on year (YoY) was affected by a 400 basis points (bps) YoY impact of higher commodity prices/sharply lower other income. Maruti’s order backlog though remains healthy at 200k units due to sustained demand for personal mobility.

“Growth in rural demand with strong sowing season, supported by growing demand from urban market and expedite in COVID vaccination drive by the government should improve performance. These factors will be supported by new product launches and recovery in margins along with favorable product mix. However, the current movement in input cost and negative currency fluctuations can impact the performance,” analyst at Geojit Financial Services said in Q4FY21 result update report dated April 30, 2021.