Maruti engine sputters on small car woes
Maruti Suzuki India Ltd
, India's largest carmaker, fell to a five-year low in June as demand for its bread-and-butter
small cars
and compact sedans continued to weaken.
An email sent to Maruti remained unanswered.
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June is typically when Maruti undertakes its bi-annual plant maintenance shutdown, but this year's figure is the lowest for the month since 2020. Output has fallen 23% to 125,392 from 163,037 in June 2021, according to the company's monthly production filing.
The slide is reflective of broader fatigue in the small car segment, once Maruti's mainstay, amid a shift in consumer preferences toward sport utility vehicles (SUVs) and premium models. SUVs now account for 66% of the total sales mix, according to the Society of Indian Automobile Manufacturers (SIAM).
Besides this, Maruti lacks electric vehicles in its model range. Rivals
Tata Motors
and Mahindra & Mahindra have a head start in that segment.
Live Events
Dealers say inventory levels have been gradually building up at outlets, particularly for models such as the Alto, S-Presso, Dzire and Celerio, forcing the automaker to regulate output to avoid overstocking.
'Despite attractive consumer offers, demand in the entry-level segment has remained tepid for several quarters,' said a senior executive at a leading Maruti dealership.
Changing Buyer Preferences
'Rising ownership costs, changing consumer aspirations, and urban market saturation are all playing a role.'
According to a July 1 report by Kotak Institutional Equities, Maruti's domestic sales declined 4.5% year-on-year in the June quarter, pulled down by a steep 36% drop in the sales of its smallest models.
The broader market hasn't fared much better.
Passenger vehicle sales
in India fell 1.4% to 1 million units in the April-June period from the year earlier, snapping a four-year growth streak, according to data released by SIAM on Tuesday. Analysts said the outlook for small cars remains weak in the near term, and manufacturers may need to re-strategize product portfolios to align with evolving buyer preferences.
'Apart from the structural changes in the car market, lack of a completely new model introduction in the small car segment has made it unattractive for the buyers,' said Puneet Gupta, director at S&P Global Mobility.
Companies are no longer looking at investing in new small car models as tighter regulations on emissions and safety have made it unviable for manufacturers to sell cars at competitive prices, he noted.
Brokerage Nomura Research has maintained its FY26 growth forecast for passenger vehicles and two-wheelers at 5% and 7%, respectively. 'We expect demand to improve in the second half, led by lower income tax and reduced interest rates,' Kapil Singh of Nomura Research said in a note.
Expectations that the upcoming festive season—along with lower income taxes and interest rates—may revive demand need to be balanced by Chinese curbs on the export of rare earth magnets, a critical component of EVs and ICE engines.
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