WAYS2CAPITAL STOCK UPDATE : Maruti loses speed as PV growth slows amid rising challenges

 

 

Maruti Suzuki India Ltd’s announcement of a price hike across its vehicles from 1 January did not go down well with investors. The stock reacted negatively on Thursday, although it recovered some the next day.

That a routine price hike done by auto firms in January to pass increases in costs onto consumers should worry is strange. The reason is that investors perceive the hike this time around would hit demand.

After all, the going has not been great for Maruti Suzuki and the overall passenger vehicle (PV) industry in recent months. From a robust double-digit growth for almost 18 months, the company’s sales shifted to the slow lane in July. Sales were flat in November compared to the year-ago period.

Moreover, dealer feedback that hefty discounts are being doled out to push sales is fuelling pessimism on the Street. Average discount in the September quarter was ₹18,750 per vehicle, 23% more than a year earlier. Talk is that discounts have been even higher this quarter.

R.C. Bhargava, chairman of Maruti Suzuki, said in a media interview on Friday that a slowdown is not alarming given the strong growth for four years.

Indeed, Maruti Suzuki is not alone in losing speed. The second-largest carmaker Hyundai Motor India Ltd also posted a drop in sales in November. Even in the festive season, industry inventory levels were unusually high.

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