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Maruti Suzuki may see volume drop this fiscal year

By Motortrend India Staff   |   21 November,2011

Maruti Suzuki may see declining sales volume in the current fiscal year as the country’s dominant carmaker suffered heavy production losses due to a labour strike, while demand for cars remains weak in Asia’s third-largest economy.

“We’ll be lucky if we break even with last year,” Maruti Suzuki Chairman R.C. Bhargava said in an interview for the Reuters India Investment Summit. Maruti Suzuki, which specialises in small models, sold 1.27 million cars in the fiscal year that ended in March, an increase of 25 percent.

“So, it might even be slightly less than last year. There are still four months to go. Let’s see how it goes but I doubt if we’ll have any growth this year,” he said. Bhargava had said in August he expected Maruti, 54.2 percent-owned by Japan’s Suzuki Motor Corp, to post single-digit sales growth this fiscal year.

He said on Monday he expects the Indian automobile industry to grow 2-3 percent this fiscal year, compared with the record 30 percent growth it had clocked a year ago.

Slowing economic growth, rising interest rates and fuel prices as well as falling stock markets have dampened sentiment in the Indian auto market.

“While first-time car buyers...have continued to buy cars, the people who used to replace cars or buy a second or a third car in their family, those people have deferred buying decisions this year,” Bhargava said. He remained optimistic for a demand revival but said it was difficult to give a time frame.

Maruti which until last year sold nearly every other car in India, faces tough competition from global car makers such as Hyundai Motor Co, Ford Motor Co, General Motors Co and Honda Motor Co and has seen its market share slide to just over 40 percent.

Maruti was hit by a labour strike at a key plant in the northern state of Haryana, where workers wanted to leave their existing union to form one of their own. The unrest led to a production loss of about 83,000 cars, or almost half a billion dollars in output, while buyers were made to wait longer for the cars they ordered. Bhargava said recent rises in petrol prices have boosted demand for diesel cars, but Maruti did not have capacity to meet the demand.

Maruti is in advanced talks with Italian automaker Fiat SpA to source diesel engines to boost its production and expects to receive supplies starting in January, he said.

Europe has traditionally been the biggest export market for Maruti, but the company is now trying to build the export market beyond the debt crisis-racked continent, focusing on Southeast Asia, Africa and Latin America, Bhargava said.

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