Suzuki Motor Corporation has drastically cut the sales estimate of its Indian unit Maruti Suzuki by 20 percent in FY 2020. The Japanese auto company made the change in estimates after Maruti's poor performance in Asia's third-largest car market in the first half of the financial year. Between April and September this year, Maruti's volume declined by 25 percent, bringing down Suzuki's global sales by 17 percent. The Japanese company says that despite a slight recovery in October, volumes will decline by 13.2 percent in the full fiscal year.
Also cut profit estimates
Suzuki has also cut its earnings, operating income and profit estimates by 10.3, 39.4 and 30 percent respectively in FY2020 as compared to June quarter estimates. Suzuki Motor Corporation is projected to sell 28.4 lakh automobiles and 17.7 lakh motorcycles in this financial year, 14.7 and 3 percent less than its previous estimate respectively.
BS-VI emission norms will have more impact
Maruti had previously set a target of selling 20 lakh vehicles annually by FY 2020, but now expects to sell 1.5 million vehicles this fiscal. After Suzuki's sales estimates were cut, Maruti chairman RC Bhargava told ET in an interview that the shift from BS-IV to BS-VI emission norms in the next four-five months is very important. He said that due to this, the time to come will be very uncertain.
Great pressure on auto sector
Bhargava said, "While Maruti Suzuki's wholesale sales increased in October, sales of other companies declined. Our sales have fallen by 25 percent in the first half of FY 2020. Therefore, I do not see much change in the situation in the remaining months of the year. In this sense, the 20 per cent decline in Suzuki growth in India seems reasonable. Suzuki's new estimates on India show how challenging the situation remains for auto companies, despite a slight improvement in sales in October.
Sales in the mini car segment fell by 53 percent
The biggest problem for Maruti is the mini car segment, with sales falling 53 per cent to just over one lakh units. After discontinuing the sale of diesel vehicles, in the next year and a half, the company will have to make additional compensation of 3-5 lakh units annually. Despite this, analysts continue to trust Maruti. The company's shares are trading at 30 times the estimated per-share profit, which is twice the valuation of its owner, Suzuki Motor Corporation. In the past three months, Maruti shares have risen 38 percent. At the same time, Suzuki's share price has increased by 28 percent during this period.