Overall demand for cars, festival demand in particular, has taken a hit due to rising oil prices and the new regulations on insurance, Maruti Suzuki Chairman R.C. Bhargava said on Thursday, announcing the company’s Q2 financial results.
Maruti Suzuki saw the number of vehicles it sold in Q2 fall by 1.5% to 4,84,848 compared with the same period of the previous year, and net profit fall 9.8% to ₹2,240.4 crore over the same period. Over the first half of the financial year (April to September), the company saw its net profit grow 4.3% to ₹4,215.7 crore and a 10% increase in the number of vehicles it sold.
The company’s operating profit was down 9.5% in Q2 at ₹2,710.1 crore, while it grew 15.1% to ₹5,341.4 crore over the first half of the financial year. “It’s been a peculiar half year, I don’t remember one quite like this,” Mr. Bhargava said at a press conference. “In the first quarter, sales volume was strong, but profit after tax was lower. But in Q2, all financial indicators are better, while sales are lower.”
In the second quarter, Maruti saw net sales of ₹21,551.9 crore, a growth of 0.5% over the same period of last year. Net sales over the first half of the financial year grew 12.4% to ₹43,362.6 crore.
“The impact of international oil prices has been quite significant,” Mr. Bhargava said. He added that other factors exacerbating the dampening of demand included the insurance regulator’s new rules asking insurers to offer only 3-year motor third-party insurance for cars, which had to be collected for the entire three years at the time of getting insurance. This, he said, had effectively increased the price of the vehicle at the time of purchase, and had played its part in subduing demand.
“This festival season has so far not shown any great buoyancy compared to last year,” Mr. Bhargava said. “The expectation is that sales might be marginally higher during the period than last year, but normally we expect a 10-15% increase over the previous year and that doesn’t look like the case, at least so far, due to the factors mentioned.”
The most significant announcement by the government in the recent past, he said, was Petroleum Minister Dharmendra Pradhan’s statement that the country would add 10,000 new CNG terminals.
“We have eight models of cars available in CNG variants,” Mr. Bhargava said. “The growth of CNG vehicles was 50% over last year, which demonstrates the consumer preference for CNG. This is despite the long queues at the CNG pumps, which shows there is a real preference.”
Looking ahead, the chairman said he was unsure how the next six months would turn out, due to uncertainty over oil prices.