New cars line-up, Gujarat plant may bring sales cheer back at Maruti Suzuki

Automobile companies reeled under the effect of demonetisation in the last two months, with their sales volumes dipping to a 16-year-low in December. The government's move had wiped out nearly 86% (in value) currency from the system, taking away buying power from the people. 

Car sales were a mixed bag in December but Maruti Suzuki only saw a small dent in the month. It now seems like Maruti Suzuki may be on its way to gain sales momentum. 

While several carmakers posted a double digit fall in its sales in December, Maruti sold only 1% less vehicles in the month. While its total domestic sales fell 4.4%, its exports grew 47.1%. Total sales were down only 1% in the month. 

More Bookings 

According to an Emkay report, Maruti Suzuki's inventory levels had declined to three weeks in November 2016 and were at four weeks at the start of December 2016. However, bookings of the company which had gone down by 20% in November 2016 saw about 6-7% Year on Year (YoY) pick-up in December 2016. Rural sales saw about 17-18% YoY growth during December 2016. 

The company's rural growth year-to-date stands at 14%.

The turnaround in the bookings show that demand for Marutis may be coming back after the demonetization hit.

New Launches
Besides this, Maruti Suzuki also has strong line up of new launches starting with the Ignis' launch on January 13. Maruti is also going to give its popular Swift (which will be launched during the festive season this year) an upgrade as it is to the Baleno, Ciaz and the Dzire.

Long Waiting Period becomes a Boon 
While bookings were recovering, the long waiting period for the Vitara Brezza and the Baleno hatch came as a relief in disguise for the carmaker. Both the cars have a waiting period of around 5-6 months. The long wait period acted like a cushion and led to a smaller impact on sales during demonetisation.

Easing Capacity Constraints
Capacity constraints are likely to easing with the Gujarat plant going on steam in early 2017. The plant will be operational by February or March 2017, the report said. 

“Production constraints likely to be eased as Phase I of Gujarat will come on stream, while Phase II which shall add a capacity of another 250,000 units is likely in CY2019,” say automobile analysts Mihir Jhaveri and Bibhishan Jagtap at Emkay Global Financial Services.

“While January and February volumes remain crucial, we expect a volume compound annual growth rate (CAGR) of 12% over FY17-FY19 due to a strong new model pipeline, easing of capacity constraints and demand normalisation,” they added.