Maruti’s August retail sales up but good times unlikely to last

New Delhi: Hit by the lockout in its Manesar plant, Maruti Suzuki India has said it dispatched just 54,154 units to its dealers in August against 91,442 units dispatched in the same month last year.

While the decline in dispatches is no surprise, it must be noted that the company has claimed higher retail sales (sales from dealers to customers) for some models during the month.

It said retail sales for July and August were 145,087 units, a growth of 6.7 percent over the same period last year.

Production at Maruti’s Manesar plant (which makes Swift, Dzire, A-Star and SX4) resumed only partially on 21 August so sales of most of its cars are on account of dispatches from the Gurgaon facility and piled up inventories of previous months.

Also, while domestic performance for Maruti was understandably muted, exports declined by a whopping 72 percent during the month to 4,025 units (14,356 units). Maruti’s performance determines the fate of the entire passenger car industry since it accounts for just a little less than every second car sold in the domestic market.

Kapil Singh and Nishant Jalan of Nomura Equity Research said in their note to clients, just three days back, that car industry volumes are expected to decline by around 6 percent this August, largely due to the lockout at Manesar.

The two analysts had estimated the Maruti sales shortfall to be around 30,000 units. But since the company has dispatched even lesser number of cars to dealers than this estimate, industry growth may also decline further.

The two analysts also quoted the Maruti management to say that retail volumes for the company are likely to be flattish in August (Maruti was supplying cars from its inventory buildup in earlier months even when Manesar was not making any cars).

Singh and Jalan have estimated 19 percent year-on-year decline in domestic volumes for Maruti, but a gain of around 57 percent growth in car volumes for rival Tata Motors, largely due to higher Nano sales (Nano sales were only 1,200 units in Aug 2011).

A report by IIFL pointed towards further weakening of demand for petrol cars and said demand for even diesel cars is waning.

“Cash discounts are being offered on petrol (all models) and diesel variants (some models) along with free insurance and accessories,” this report said.

It also estimated that the average waiting period for Maruti’s Swift, Dzire and Ertiga is between 2-3 months while for the Dzire waiting period has increased from a month in June to two months due to Manesar lockout.