Maruti expects Oct production to fall 40%; chip shortage issue resolving slowly

Maruti to benefit most once chip shortage issue gets resolved: LKP Securities

According to him, while there’s a little improvement but it’s difficult to give an exact timeline as to when things will start to normalise.

The story that Maruti had asked vendors to be ready for between 160,000 to 180,000 units a month in October was more speculative in nature. “This story came out just a couple of days back before we informed the stock exchange about 40 percent lower production in the month of October. It is difficult for me to comment on that story because I do not know from where the journalist got that information. Certainly, it wasn’t from us and therefore probably, it was more speculative in nature,” he explained.

Ever since BSVI norms came in, the company has always maintained that the cost of conversion of diesel vehicles to BSVI was quite high. Fuel prices of diesel and gasoline are extremely close to each other. So, the diesel plans do not make economic sense.

Also Read: Maruti, Tata Motors, Ashok Leyland top analysts' playbook as Street pins hopes on monthly sales, festive season

“The difference between the petrol vehicle and the diesel vehicle is very high, it used to be about Rs 1,00,000 and Rs 1,05,000 for an equivalent vehicle but it is now more in the range of Rs 1,50,000 and for some vehicles it is Rs 2,00,000. That was one of the reasons why we said that for price-sensitive sectors specially on the lower end of the spectrum for automobiles, diesel does not make economic sense when you see fuel prices of diesel and gasoline being extremely close to each other,” he said.

Diesel demand has come down dramatically in the recent past - from about 60 percent seven years’ back to less than 17 percent.

“It does appear that diesel demand seems to be disappearing. CNG is now close to 30 percent of the industry. So, while diesel is slowly disappearing, CNG has been going up equally dramatically. We will be closely watching diesel and take the decision. As soon as we decide on that, we will definitely let you all know about what we plan to do with the diesel market,” he stated.

In terms of market share, Srivastava said, “In the last 20 years, we have had market share ranging between 42 percent and 48 percent to 50 percent. Only on two occasions, it was around 40 percent which was in 2013 and 2012. However, we have been above 50 percent market share in three years of these 20 years. It did come down last year because of production shortage as our supply chain was badly affected during COVID-19 and this year also, it is down largely on account of shortfall in terms of production.”

The company has taken 1.4 percent price hike in January, 1.6 percent price hike in April and 1.9 percent very recently. “Consensus seems to be that going forward, there might be a softening of the commodity prices. So, the pressure to increase prices might be a little less but then we never know, so we keep watching the situation hoping that it will continue to soften,” he said.