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Despite this, the stock of Maruti
A lot, however, depends upon whether its dealers would prefer to refill their inventories following upbeat sales during the latest festive season and to what extent.
In addition, the company faces stiff competition in the SUV segment at a time when it has vacated the diesel segment amid regulatory changes. These factors may make volume improvement an uphill task.
The slowdown and liquidity problem faced by dealers has led to a reduction in inventory across most carmakers and focus on retail sales as opposed to wholesale volumes (vehicles despatched to dealers).
This is evident from the divergence in the retail and wholesale sale volumes. For instance, in October, retail sales rose by11 per cent, according to data provided by the Federation of Auto Dealers Associations, while wholesale data released by the Society of Indian Automobile Manufacturers (SIAM) showed a measly growth of 0.3 per cent.
The carmakers made concerted efforts to reduce inventory to 25-30 days in October from 50-60 days a few months ago to ease the burden on dealers. Wholesale volume growth will largely depend on whether the companies refill dealer inventories to levels existing before the slowdown. This is also dependent on whether the dealers would risk piling up inventories at a time when demand continues to remain weak.
Maruti Suzuki’s volume fell 24 per cent in the first half of the current fiscal. It is expected to fall 15-17 per cent for the full FY20, the worst decline in over five years.
Maruti Suzuki has launched its eight petrol models ahead of new emission norms effective from April 2020. However, the company will not be manufacturing diesel vehicles in the medium term as it is evaluating cost competitiveness of diesel cars under BS-VI.
Kia Motors has launched its sports utility vehicles (SUVs) Seltos in both petrol and diesel variants. Even as the fate of diesel vehicles remain uncertain under BS-VI regime, a sizeable number of bookings is for the diesel variant.
Maruti may also face a loss of market share in the fast growing compact SUV space due to lack of diesel models. According to Kotak Institutional Equities, Maruti has lost 190 basis points of market share yearon-year in the current fiscal so far primarily driven by 15 per cent loss of market share in the compact SUV segment. These factors makes it a tough task for it to revive volumes, which may affect its stock valuation.
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2 Comments on this Story
Kishore Shivani451 days ago
YET THEY WANT TO INCREASE THE PRICE TO MEDS UP THE COMPANY FURTHER AND THEN ADK FOR SOPS AND TAX REBATES IN DEC BUDGET .BUNCH OF ROGUES CROOKS CHEATS OPPORTUNISTS WHO WANT ONLY TO MAXIMISE THEIR PROFITS AND THEIR BONUSES AND ESOPS .
Rewarding India451 days ago
this company is messed up now