While demand is holding up for the auto industry, Maruti Suzuki has raised five red flags that could affect it going forward. The five red flags, as mentioned by Shashank Srivastava, Senior ED- Marketing and Sales, Maruti Suzuki, are a resurgence of COVID, increase in commodity prices, issues with availability of components, inflation and high fuel prices.
"We have flagged five red flags, which could affect the demand going forward. First, of course, is if there was a resurgence of COVID... Second is the increase in the commodity prices, which could lead to increased prices further. Third is the availability itself of components because of the semiconductor issue and fourth is the effects which inflation may have on sentiments and (fifth) is the high fuel prices," said Srivastava in an interview with CNBC-TV18.
Srivastava said that the company has achieved about 92 to 95 percent of the production target in May while the loss due to chip shortage could be 5 to 8 percent. Maruti Suzuki has 2.95 lakh pending bookings, he said.
The company's total wholesales in May stood at 1,61,413 units against 46,555 units in May 2021. Last month, the company's domestic sales rose to 1,34,222 units from 35,293 during the same period last year.
However, the sales numbers of last month cannot be compared with those of May 2021 as the company's operations were significantly affected due to COVID-19.
According to Srivastava, the overall industry sales for small cars have come down from 45 percent to 38-39 percent of total in the last few months and the entry level segment has been most impacted over the last three years as a price rise always hits these models the hardest.
Last month, the company had said that it had not completely recovered from the rising commodity prices despite the 10 percent increase it has implemented in prices so far in the last one year, hinting at more hikes going forward.
The company sells a range of models including Alto, S-Presso, Wagon R, Celerio, Swift, Eeco, Dzire, and 2022 Ertiga.
In its latest price increase in April, the country's top car seller announced a hike "across models owing to increase in various input costs".
According to Autocar India, the revised prices of Maruti models are as follows:
Arena models price hike
Nexa price hike
"We keep watching the situation as we go along and remember the material cost is about 75-78 percent of the cost structure of an auto OEM and therefore a change in commodity prices obviously has a large impact on the overall cost structure,” Srivastava had told CNBC-TV18 last month.
Besides, any increase in regulatory costs and insurance costs also impacts consumer sentiment. "Remember, the third party insurance is compulsory for three years at the time of buying. So the increase has been roughly in the range of about 18 to 23 percent for different types of vehicles. Of course, it happens every year and the last two years it had not happened because of the COVID," added Srivastava.
First Published: Jun 2, 2022 4:34 PM IST
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