New Delhi: While the overall demand for cars has slowed down this year and the industry is having a difficult time, Maruti Suzuki is expecting a double-digit growth in retail sales during the festive season, Chairman RC Bhargava said on Tuesday.

“We are expecting our retail sales starting from the Shraddh period till the end of Diwali to roughly clock a 14% growth compared to the same period last year. And that will have an impact on the inventory levels of the dealers, which will come down by the end of this month to 30 days. The new inquiries and bookings have also been better than last year,” Bhargava said, during a post earnings call. For October, the company expects to retail over 2 lakh vehicles.

He added that during the last two months the industry had a very large inventory in the system and OEMs have been systematically planning production to reduce it to suit the market requirements.

Bhargava noted that demand for new cars is slowing owing to “affordability” and that “the performance of the car industry and the market is determined by the retail numbers, not by the wholesale numbers.”

The company expects Q3 (October-December) to be a “reasonable quarter” with a growth rate of 3%-4%, similar to expectations for the full-year period.

Demand for small cars

Bhargava said that the market for cars under INR 10 lakhs, which used to account for about 80% share in FY 2018-19, is not growing now. “It is declining, and that is a cause of some worry because unless the lower end of the market grows, there is going to be no feeders into the upper end of the market.”

“It is not the overall slowdown which is worrisome, but the segmentation which has happened. The fact that growth is taking place only in the more expensive cars. That doesn't make me very happy,” he said.

Maruti Suzuki agreed that it was a “late starter” in the SUV market. However, it says that despite competition it now holds a 27% share in this category. “We came in after all the others had a much larger market share.”

During the first half of the year, demand from rural areas was good, however urban demand was impacted due to elections and monsoon.

The company’s capacity utilization currently stands at around 90%. In addition to the Kharkhoda plant, the automaker is finalizing a new site where it is going to expand next. “I can't yet disclose to you where that site is, but we would be able to do that fairly soon once we have the deal finalized with the concerned state government.”

Hybrid vehicles

Currently, Maruti Suzuki offers strong hybrids in two models– Grand Vitara and Invicto. Partho Banerjee, Senior Executive Officer- Sales & Marketing of the company said the demand for its strong hybrid segment is growing at a rate of about 30% this year.

Currently, Uttar Pradesh offers a waiver on registration fees on hybrid cars. When asked about other states, Banerjee said, “Punjab is offering a waiver on the RTO tax to the tune of 25% and Haryana is also planning for it. The talks are going on.”

Q3 Earnings

On Tuesday, Maruti Suzuki reported a 18% year-on-year drop in consolidated net profit at INR 3,102 crore for the July-September quarter. The company had posted a net profit of INR 3,786 crore in the corresponding quarter of last fiscal year.

Total revenue from operations increased to INR 37,449 crore during the second quarter when compared to INR 37,339 crore in the year-ago period.

The company sold a total of 5.41 lakh vehicles during the quarter under review. This includes domestic market volumes of 4.63 lakh units and the export volume at 77.71 lakh vehicles.