New Delhi: Maruti Suzuki India Ltd, the country's largest car manufacturer, is set to significantly ramp up its production capabilities by adding a capacity of 500,000 units across its facilities in Haryana and Gujarat. This strategic move comes as the company strives to meet soaring demand following substantial goods and services tax reductions, which propelled it to achieve its highest-ever quarterly revenue.
Record-Breaking Financial Performance
The automaker, renowned for models like the Grand Vitara, reported a robust financial performance for the October to December quarter. Profit after tax witnessed a 4% year-on-year increase, reaching ₹3,879 crore. This growth occurred despite a one-time provision of ₹593 crore related to the implementation of the new labour code. Revenue surged impressively by 28% to ₹50,959 crore, driven by record quarterly sales of 667,769 units.
Capacity Expansion Details
During an earnings call with analysts on Wednesday, company executives outlined the expansion plan. Maruti Suzuki will add a cumulative 500,000 units of capacity this year. Specifically, 250,000 units will be added at its Kharkhoda facility in Haryana by April, with an equal volume to follow at the Hansalpur plant in Gujarat shortly thereafter.
Rahul Bharti, Senior Executive Officer for Corporate Affairs at Maruti Suzuki, emphasized the demand dynamics. "The primary driver of our sales volume growth in Q3 compared to the same period last year has been the small car segment in the 18% GST bracket. Fortunately for Maruti Suzuki, the demand is robust across the whole spectrum. We had to work on Sundays and holidays to meet the demand," he told analysts and investors.
Strong Market Position and Inventory
Bharti further highlighted the company's strong market position, noting that the quarter ended with a remarkably low network inventory of just three to four days. Additionally, Maruti Suzuki maintains a healthy order book of approximately 175,000 vehicles, underscoring sustained consumer interest.
As the first automaker to announce results for the October to December quarter, Maruti Suzuki's performance aligns with broader industry trends. According to data from the Society of Indian Automobile Manufacturers (SIAM), passenger vehicle sales across companies grew by 21% year-on-year, reaching 1.27 million units during this period.
Focus on Small Car Segment
The small-car segment has been a critical growth driver for Maruti Suzuki. The company implemented price cuts beyond the 10% GST relaxation introduced by the government in September. This strategy paid off, with small cars contributing significantly to incremental growth during the quarter.
Domestic sales increased from 466,993 units in the previous year to 564,669 units in the October to December quarter. Notably, the small car segment, encompassing mini and compact cars, accounted for three-fourths of the 97,676 unit increase in domestic dispatches.
Partho Banerjee, Senior Executive Officer for Sales and Marketing, explained the production adjustments made to prioritize small cars. "If we are producing more small cars, we have to sacrifice some other models. So, in order to serve our customers on a turn-by-turn basis, we are trying to produce the models, and we are delivering them to customers," he stated during a media conference on 1 January.
Future Outlook and Cautious Optimism
While the automotive industry remains optimistic about sustaining growth momentum, Maruti Suzuki is taking a measured approach. Bharti addressed queries about the outlook for the coming months and the upcoming financial year, emphasizing the need for careful assessment.
"The query remains in our mind: what is the sustainable level of demand after the euphoria is over? So, I think in about a few months from now, we will again do a careful review and a careful assessment of what is the sustainable level of demand in the next year and in the next few years," Bharti remarked.
Previously, the company projected a 7% growth for the passenger vehicle industry in the next financial year, 2026-27, with small-car sales expected to drive this growth at a rate of 10%.
Market Reaction
Following the announcement of its quarterly results during market hours on Wednesday, shares of Maruti Suzuki closed 2.4% lower. This decline contrasted with a 0.7% gain in the Nifty Auto index, indicating mixed investor sentiment amidst the company's strong operational performance and expansion plans.
