Maruti Suzuki lists 2 key reasons for poor Q2: Higher cost of buying car; weak lower priced model sales

The higher cost of buying a new car and weak sales in the low-cost model category impacted the company’s earnings substantially in the second quarter of FY20, Maruti Suzuki India Limited (MSIL) Chairman RC Bhargava said. It comes as the country’s largest car manufacturer reported a 24 per cent drop in sales in the first half of the ongoing fiscal. Volume sales during the quarter under review stood at 3,38,317 units, down 30.2 per cent as compared with the same period last fiscal. Adding, RC Bhargava said that a substantial fall in the availability of finance has been one of the leading factors for the dismal sales in the quarter under review. In addition, an increase in road taxes and registration charges have acted us further dampener, he also said. Goa is the only state to have rolled back a hike in registration charges, even as nine other states increased road taxes, RC Bhargava noted. On higher interest rates, he said that the rate reduction only happened when the Finance Minister Nirmala Sitharaman intervened.

MSIL reported a 39 per cent on-year fall in net profit to Rs 1,359 crore in the second quarter of FY20, amid an economic slowdown that has hit demand across sectors. MSIL had posted a profit of Rs 2,240 crore in the second quarter of FY19. The revenue from operations fell 24 per cent to Rs 16, 985 crore as against Rs 22, 433 crore in the period under review, MSIL said in an exchange filing on Thursday. The auto firm that is majority-owned by Japan’s Suzuki Motor sold 338,317 vehicles during the September quarter, down 30 per cent from a year earlier. The EBITDA margin shrank by 53 per cent to Rs 1,606 crore in Q2FY20. Even the margin fell 580 bps to 9.5 per cent.

The net profit for the first half of the fiscal ended September was at Rs 2,767.9 crore as against Rs 4,295.3 crore, down 35.55 per cent. The revenue from operations in the first half stood at Rs 34,862 crore as compared to Rs 43,367.5 crore in the corresponding period last fiscal.

Maruti Suzuki India Limited