Maruti Suzuki eyes big boost in sales from Nexa as Baleno sales spike and Ciaz adds to effect

Maruti Suzuki expects to better its FY17 performance further in the current fiscal by selling more than 300,000 units from Nexa, thus upping the premium showroom’s total share in the company’s overall sales volume to 20%. In FY17, Maruti achieved 15% of its total sales in volume terms from Nexa, three years ahead of schedule. According to sector analysts at the end of the current fiscal, the contribution of high-end vehicles, which are retailed through Nexa showrooms, may be around 30-33% in value terms. In FY17, Nexa’s contribution to the company’s topline was around 25%.

According to RS Kalsi, executive director, sales and marketing, Maruti Suzuki, the production of premium hatchback Baleno has increased from an average of 9,000-9,500 units last fiscal to 16,000 units in the last couple of months. “This year, we should be crossing the mark of 300,000 units for the fiscal year. It is going to be around exceed 20% of the total sales and the number of models available at Nexa has also increased,” added Kalsi.

Earlier this year, Maruti Suzuki launched the urban compact car Ignis which is sold from Nexa and the management also took a decision to sell its popular mid-size sedan, the Ciaz, from Nexa instead of the traditional dealerships. This added an average 10,000 units to the total sales from Nexa.

During April-July of the current fiscal, domestic volumes of Baleno increased by 69.3% y-o-y to 60,369 units. In July, volumes of Baleno increased by 110% to 19,153 units. According to industry sources, volumes in August stood around 17,000 units. Despite the rise in taxes of the hybrid variant, volumes of the mid-size sedan Ciaz sales increased by 17% y-o-y to 22,075 units during the same period. The company also managed to sell 17,096 units of the Ignis in the first four months of the fiscal.

“Within PVs, Maruti Suzuki continues to be well positioned with a consistent waiting and nil discounts across new products (Baleno, Vitara Brezza, and Dzire). However, other OEMs continue to see increasing discounts and higher inventory levels in some cases as well,” said Sahil Kedia of Morgan Stanley in a report on the sector.

The increasing sales of premium products will further boost the realisation per unit of the company which may lead to a healthy increase in revenues. In the the first quarter (April-June ) of FY18, the realisation per unit of Maruti increased by 4% y-o-y to Rs 4,38,000 per vehicle. While in the last quarter of FY17, the realisation went up by 5% y-o-y to Rs 4,42,000 per car.

“We expect MSIL’s market share to improve going forward on the back of incremental volumes of recently launched Ignis, along with robust volumes of the Baleno and the Brezza, which still continue to enjoy high waiting periods,” analysts of Motilal Oswal said in a report.

While starting Nexa, Maruti set a target to get 15% of the overall volumes by 2018 and the increasing Baleno demand made it achieve the target within one-and-a-half years. As of now, Maruti has 280 Nexa dealerships.