Maruti Suzuki, India's largest carmaker, reported a significant 50% increase in discounts for the first quarter of FY25 compared to Q4FY24, a promotion expense to drive sales in a tough market impacted adversely by an acute heat wave and subdued sentiment, the company said on Wednesday.
The carmaker's discount offerings surged to an average ₹21,700 per vehicle in the June quarter, compared to ₹14,500 in the previous quarter.
Despite the discounts, the company's net profit in the quarter ending June 2024 rose sharply to ₹3,649.9 crore, up 46.9% year-on-year (y-o-y) from the previous year's ₹2,485.1 crore.
The rise was driven by cost reduction efforts, favourable commodity prices, and beneficial foreign exchange rates, the company said in a post-earnings conference call.
Net sales, meanwhile, rose to ₹33,875.3 crore in the quarter, up from ₹30,845.2 crore in Q1FY24.
“On a sequential basis, the raw material-to-net sales ratio improved by 90 basis points, aided by the reversal of a one-off adverse element from Q4FY24 and marginal benefits from commodity prices," Rahul Bharti, chief investor relations officer, Maruti Suzuki, said, adding that operating income also contributed to margin expansion, despite increased advertisement expenses related to the Swift launch and the T20 World Cup.
Consequently, Maruti Suzuki's EBIT (earnings before interest and tax) margin improved from 10.8% in Q4FY24 to 11.1% in Q1FY25.
“Despite the less-than-ideal market conditions, we could achieve retail sales nearly at par with the previous quarter,” Bharti added.
Maruti Suzuki sold a total of 521,868 vehicles in Q1FY25, an increase of 4.8% y-o-y. Domestic sales stood at 451,308 units, a 3.8% rise, while exports rose 11.6% to 70,560 units.
“In the domestic market, the demand for passenger vehicles was muted to some extent, largely due to the heat wave and elections, which kept many potential customers away from our showrooms,” Bharti said.
“We also get a sense that there are indeed customers in the market, but might be waiting for an auspicious period or a more attractive time or some reasons to make their purchase," he said, adding that the company is increasing its focus on improving retail sales.
“Going forward, a better monsoon season coupled with the onset of the festive period is where the industry is pinning its hope,” he said.
The company maintained its outlook for sales for the full fiscal year of a low-single digit growth in PV (passenger vehicle) sales.
The carmaker said rural markets continue to outperform urban areas for Maruti Suzuki, a trend that has persisted over time.
In April 2024, Maruti Suzuki commissioned an additional vehicle assembly line at its Manesar facility, adding a capacity of 100,000 units per annum, bringing the total manufacturing capacity at Manesar in Haryana to 900,000 vehicles per year. Additionally, a new biogas plant at Manesar began operations in June 2024, it said.
“Other segments, like two-wheelers and FMCG have suddenly shown some improvement. In terms of small car segment, we did have two new launches, the new Swift and the Dream Series Limited Edition that helps generate some excitement in the market and keeps bringing the customer back to the showrooms. So to that extent, we are trying to arrest the decline (in the small car market),” Bharti said.
