Maruti increases Swift dispatches but where are the green shoots?

New Delhi: Hoping for a pickup in petrol cars, Maruti Suzuki India has begun dispatching more of some of its popular models to dealerships in August this year but still sales of its Alto family of cars and WagonR don’t seem to have picked up as anticipated.

This is a comparison of dispatches against July since any comparison with August 2012 would be flawed - last year one of the company’s manufacturing plants was shut after a deadly riot and production of key models like the Swift had been severely affected.

Company officials say the festival season has already begun with month long Onam festivities beginning mid August in the southern markets and buying would pick up in western markets around Ganesh Chaturthi in September. So Maruti dispatched more of its premium hatchback Swift and Ritz cars last month to dealers at 17,409 units versus only 13,882 in July.

But what could point towards a very slow festival season 2013 is the surprising decline in dispatches of small cars - Alto 800, Alto K10 and WagonR - 32,019 units against 33587 units in July. Unless the small car portfolio picks up, there can be no meaningful growth in sales even during the festival season since these cars primarily sell in rural and semi-urban pockets and a good monsoon is helping sales only in these areas, not in big cities.

Maruti’s overall domestic dispatches did not vary much in August over July, at 76,018 units against 75,145 units in July.

So is the worst really over for the car industry and for Maruti in particular? Chairman R C Bhargava said in a interview to Business Standard newspaper this morning that the worst four-five months are over and that good monsoon will boost growth.

He based his optimism entirely on robust rural growth expected this year on good monsoons but went on to admit that rural markets account for only 30% of the company’s sales or less than one in three cars are sold in rural areas.

How will the slowdown in urban markets abate? Especially since petrol l prices have been raised further since Saturday night and diesel is anyway increasing every month in a calibrated manner and a further hike in prices of both fuels is under consideration.

Bhargava’s optimism is not only hurried - the festival season is not well and truly here till now - but is also based on a lot of discounts driving the market.

A recent analysis by Srinivasa Rao and Amyn Pirani of Deutsche Banks shows that Maruti’s blockbuster Swift is selling at a Rs 20,000 discount for both, diesel and petrol, variants. The WagonR has Rs 50,000 off and the Alto 800 (old Alto) has Rs 43,000 less on its sticker price; Dzire diesel has a Rs 1,5000 discount.

Numbers released by Maruti show it sold only 348 units of the SX4 sedan in August to dealers against 322 units in July; Ertiga dispatches were almost constant at 4563 units (4562 units) whereas Omni and Eeco combined were at 7956 against 7543 units in July.

Exports posted a healthy increase month on month, from 8154 units in July to 11,305 units in August.