Maruti eyes new catch, pampers petrol car buyers

This is the best time to buy a petrol car, especially if you drive less than 1,000 km in a month.

At a time when the market is increasingly skewed towards diesel, it makes sense to go contrary and explore the benefits of a petrol car. At least that is what Maruti Suzuki India would have us believe.

Hit by a steep decline in sales of its petrol models, Maruti has begun to identify potential customers who, the company says, are relatively immune to frequent increases in petrol prices because they don’t drive very extensively and would rather save the incremental payment needed to buy a diesel vehicle by going in for petrol cars. A diesel car is about 15-18% expensive than a petrol variant.

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And such customers are being pampered too. Already, petrol cars from Maruti are coming with huge discounts - the company itself admitted that discounts have been the highest in the March quarter this year.

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The Maruti Alto, which is the single largest selling car in India, now comes with discounts of between Rs 22,000 to 25,000. Overall, average discounts (across all Maruti cars including diesel cars) stood at Rs 13,250 in FY13 against Rs 12600 in the previous fiscal.

Maruti has been hit quite hard by the increasing diesel preference - its petrol market share in FY12 was 56% but it sold only one in five diesel cars (with 20% market share) in this period. As of now, every other diesel car on waitlist is from Maruti - the car industry has a backlog of 4 lakh diesel vehicles of which Maruti alone accounts for about 1.8 lakh.

The company has already ramped up diesel capacity - from 2.43 lakh diesel engines in FY12 to four lakh in FY13 (including one lakh from Fiat) - but its diesel backlog will take time to diminish. Even on the Ertiga MPV, which was launched earlier this month, the waiting period is almost four months for a diesel variant. And everyone wants diesel - almost 20,000 of the 22,000 cars booked till now are in the diesel variants!

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No wonder then that Maruti is now keenly focusing on increasing petrol sales - petrol cars still account for about half of the overall market.

Chief Financial Officer Ajay Seth said that higher discounts last fiscal, especially in the March quarter, were one of the reasons for the company’s net profit being hit, with a 50 basis point (0.5 %) impact on profit before tax for the company in 2011-12. Maruti today reported 3 percent fall in fourth quarter net profit, its third consecutive quarterly slide on sluggish sales growth and tighter margins. Profit fell to Rs 640 crore in the January to March quarter from 680 crore a year earlier. Revenue rose 17.2 percent to Rs 11486 crore (Rs 9796.7 crore).

For the full year, net profit was down 28.6% at Rs 1635.1 crore (Rs 2288.7 crore) on 3.2% decline in inet sales at Rs 34705.9 crore (Rs 35849 crore). The decline in net profit for FY12 is the steepest since 2008, when the global economy was in a bad shape. The company says its bottomline was impacted by adverse currency movement and increased commodity prices in FY12. Overall slowdown in the passenger car market, including the skew towards diesel cars, also affected performance.