Dec. 13 (Bloomberg) -- Maruti Suzuki India Ltd., the nation’s biggest carmaker, forecasts deliveries will rebound from the first drop in eight years, led by surging demand for the latest version of its best-selling car.
Sales at the unit of Suzuki Motor Corp. may rise as much as 6 percent in the year ending March 31 after dropping 11 percent in the same period a year earlier, said Mayank Pareek, the managing executive officer for sales. The Society of Indian Automobile Manufacturers forecasts car deliveries will expand as little as 1 percent this year.
Maruti has orders for 52,000 units of the new version of the Alto, which it started selling in October. That’s almost equivalent to the sales of Ford Motor Co. in Asia’s third-largest automobile market this year. Cheap parts and easy availability of service stations in the world’s seventh-largest landmass has kept customers “loyal” to Maruti amid four shutdowns due to labor strife, said Umesh Karne, an analyst with Brics Securities Ltd. in Mumbai.
“The value proposition that Maruti offers is something the competition can’t match, which is why Maruti has waiting lists on its models, while rivals are offering discounts,” said Kapil Singh, a Mumbai-based analyst at Nomura Holdings Inc., who recommends investors buy the stock. “Maruti will certainly outperform the market.”
Maruti’s shares have risen 60 percent this year, India’s second-best performing auto stock. They fell 0.1 percent to 1,474.75 rupees as of 10:48 a.m. in Mumbai trading.
Maruti, faced with a labor agitation in July that left one person dead and caused it to close one of its factories for about a month, has seen sales rise for three straight months. Deliveries at Ford, General Motors Co. and Volkswagen AG have dropped in the same period. The company also increased deliveries of diesel-run vehicles in a country where the price of the fuel is capped by the government.
“A coming together of many factors has helped us increase sales,” Pareek said in an interview. “Our new models have gained a lot of traction in the market and we have also had an increased supply of diesel engines.”
Sales of diesel-powered models including the Swift, DZire and Ertiga rose to 45 percent of total dispatches this year, compared with about 35 percent last year, Pareek said.
The industry association slashed its forecast for deliveries for a second time this year on Oct. 10. That may prompt Maruti and its rivals to offer discounts to attract buyers, said Deepesh Rathore, the New Delhi-based managing director of IHS Automotive in India.
Hyundai Motor Co., India’s second-largest carmaker, said on Dec. 1 its Indian sales last month dropped 0.7 percent, while Tata Motors Ltd., the maker of the Nano car, reported a 19 percent drop in domestic passenger vehicle dispatches in November.
Maruti’s earnings margin before interest, taxes, depreciation and amortization may narrow for a third straight year, according to data compiled by Bloomberg. The company reported a margin of 7.8 percent in the year ended March 31.
“The overall car market is weakening and Maruti will be affected,” said Mahantesh Sabarad, an analyst with Fortune Financial Services Ltd. in Mumbai. “They have a serious underutilization of their petrol engine capacity while their diesel engine capacity is overburdened.”
Another strike at the company’s main plant in Manesar near New Delhi may also sour customer loyalty should deliveries be delayed again. A general manager was killed and dozens of executives injured when the riot erupted in July, its most violent labor strife, prompting Maruti to announce a lockout.
The automaker terminated services of 500 regular workers at the Manesar plant, where a total of 3,300 workers were employed. Police arrested workers, including union leaders, following the riot, provoking protests as recently as Dec. 9.
Maruti, named after the son of the wind god in Hindu mythology, has seen its market share dwindle to about 40 percent from as high as 87 percent in 1998. Closest rival Hyundai commands 19 percent, 15 years after starting production in the southern city of Chennai.
Maruti first started selling the Alto in September 2000, priced at 300,000 rupees to compete against Hyundai’s Santro model and defunct Daewoo Motor Co.’s Matiz hatchback. The new version, introduced on Oct. 16, is 19 percent cheaper at 244,000 rupees in New Delhi, making it the company’s least expensive hatchback after the Maruti 800, which it has been producing since 1983.
Kilometer Per Liter
The company says the Alto runs 22.7 kilometers (14.1 miles) on a liter of gasoline in a nation where the fuel is 40 percent costlier than diesel, making it attractive for buyers, Brics’ Karne said. Huyndai’s Eon model offers 21.1 kilometers for every liter, while GM’s Chevrolet Spark goes 18 kilometers.
Maruti’s nearly 3,000 service centers, compared with 800 for Hyundai and 241 sales and service centers for Ford, also help lure customers.
“The satisfaction with the brand is why Maruti continues to dominate the market,” said Rathore. “Maruti’s sales and service network is a kind of machine that it has set up and it works very well.”
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