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Maruti engine sputters on small car woes
Maruti engine sputters on small car woes

Time of India

time3 days ago

  • Automotive
  • Time of India

Maruti engine sputters on small car woes

Production at 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. 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 23per cent 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 66per cent 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. 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 4.5per cent year-on-year in the June quarter, pulled down by a steep 36per cent drop in the sales of its smallest models. The broader market hasn't fared much better. Passenger vehicle sales in India fell 1.4per cent 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 5per cent and 7 per cent, 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.

Ola Electric shares fall 3% on profit booking. Should you buy or sell after Q1 results?
Ola Electric shares fall 3% on profit booking. Should you buy or sell after Q1 results?

Time of India

time4 days ago

  • Automotive
  • Time of India

Ola Electric shares fall 3% on profit booking. Should you buy or sell after Q1 results?

Ola Electric Mobility shares declined 3.08% to ₹45.63 as investors booked profits after an 18% surge in the previous session, paring gains from the recent rally. On Monday, Ola Electric Mobility reported a consolidated net loss that widened by 23% to ₹428 crore for the quarter ended June 30, 2025. However, the loss was lower than Kotak Institutional Equities' expectations. Despite this, the research firm maintained its "SELL" rating with an unchanged fair value of ₹30, based on DCF methodology. The report stated, "Ola Electric's 1QFY26 losses were lower than our estimates, driven by- 1. Better-than-expected volume offtake (7k units pertaining to previous quarter backlog) 2. Better-than-expected gross margin (Gen-3 shift) 3. Reversal in warranty provisioning, and (4) cost-control measures. While the company has improved its profitability significantly, volume offtake remains below expectations given muted industry growth and increased competitive intensity, which remains an area of concern. Maintain SELL with an unchanged FV of ₹30 based on DCF methodology (3.5X FY2027E EV/sales)." The company reported a consolidated net loss that widened by 23% to ₹428 crore for the quarter ended June 30, 2025, compared to ₹347 crore in the same period last year. Revenue from operations dropped sharply by 49.6% year-on-year to ₹828 crore. The revenue from operations compares with ₹1,644 crore reported in the corresponding quarter of the previous financial year. 'While profitability is improving, another major highlight is cash flow. Our auto business was almost neutral on operating cash flow in Q1, with a marked improvement in free cash flow (FCF) to -₹107 crore for the auto segment and -₹282 crore on a consolidated basis,' the company said in a letter to its shareholders. Further, the company expects the operating cash flow of its auto business to turn positive later this year. It noted that the auto segment requires minimal sustenance capex, with most capital expenditure directed towards research and development, followed by limited growth capex. The company managed to reduce its total expenses by 42.4% YoY to ₹1,065 crore, down from ₹1,849 crore in the same period last year. The EBITDA margin also stood at -28.6% in Q1 FY26, compared to -12.5% in the corresponding quarter of the previous fiscal year. However, Nomura Research maintains a positive view on EV margins, emphasizing a major transition in the Indian electric two-wheeler (E-2W) industry as it shifts from subsidy-led growth toward a more sustainable and profitable phase. Nomura Research "The Indian E-2W industry is transitioning from a subsidy-led growth phase to a more sustainable model. Industry-wide profitability is gradually improving as players focus on better cost structures, in-house capabilities (like batteries, ABS, and motors), and larger volumes. Battery costs have started declining again in recent quarters, supporting margin expansion and reducing price pressure. Simultaneously, there is a visible shift toward better quality and more reliable products, especially in the mass segment, which is critical to capturing the next leg of demand."

Ola Electric shares fall 3% on profit booking. Should you buy or sell after Q1 results?
Ola Electric shares fall 3% on profit booking. Should you buy or sell after Q1 results?

Time of India

time5 days ago

  • Automotive
  • Time of India

Ola Electric shares fall 3% on profit booking. Should you buy or sell after Q1 results?

Ola Electric Mobility shares declined 3.08% to Rs 45.63 as investors booked profits after an 18% surge in the previous session, paring gains from the recent rally. On Monday, Ola Electric Mobility reported a consolidated net loss that widened by 23% to Rs 428 crore for the quarter ended June 30, 2025. However, the loss was lower than Kotak Institutional Equities' expectations. Despite this, the research firm maintained its "SELL" rating with an unchanged fair value of Rs 30, based on DCF methodology. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Free P2,000 GCash eGift UnionBank Credit Card Apply Now Undo The report stated, "Ola Electric's 1QFY26 losses were lower than our estimates, driven by (1) better-than-expected volume offtake (7k units pertaining to previous quarter backlog), (2) better-than-expected gross margin (Gen-3 shift), (3) reversal in warranty provisioning, and (4) cost-control measures. While the company has improved its profitability significantly, volume offtake remains below expectations given muted industry growth and increased competitive intensity, which remains an area of concern. Maintain SELL with an unchanged FV of Rs 30 based on DCF methodology (3.5X FY2027E EV/sales)." The company reported a consolidated net loss that widened by 23% to Rs 428 crore for the quarter ended June 30, 2025, compared to Rs 347 crore in the same period last year. Revenue from operations dropped sharply by 49.6% year-on-year to Rs 828 crore. The revenue from operations compares with Rs 1,644 crore reported in the corresponding quarter of the previous financial year. 'While profitability is improving, another major highlight is cash flow. Our auto business was almost neutral on operating cash flow in Q1, with a marked improvement in free cash flow (FCF) to -Rs 107 crore for the auto segment and -Rs 282 crore on a consolidated basis,' the company said in a letter to its shareholders. Live Events Further, the company expects the operating cash flow of its auto business to turn positive later this year. It noted that the auto segment requires minimal sustenance capex, with most capital expenditure directed towards research and development, followed by limited growth capex. The company managed to reduce its total expenses by 42.4% YoY to Rs 1,065 crore, down from Rs 1,849 crore in the same period last year. The EBITDA margin also stood at -28.6% in Q1 FY26, compared to -12.5% in the corresponding quarter of the previous fiscal year. However, Nomura Research maintains a positive view on EV margins, emphasizing a major transition in the Indian electric two-wheeler (E-2W) industry as it shifts from subsidy-led growth toward a more sustainable and profitable phase. Nomura Research "The Indian E-2W industry is transitioning from a subsidy-led growth phase to a more sustainable model. Industry-wide profitability is gradually improving as players focus on better cost structures, in-house capabilities (like batteries, ABS, and motors), and larger volumes. Battery costs have started declining again in recent quarters, supporting margin expansion and reducing price pressure. Simultaneously, there is a visible shift toward better quality and more reliable products, especially in the mass segment, which is critical to capturing the next leg of demand."

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