MUMBAI: Maruti Suzuki is set to outpace the automobile sector once again, with the nation’s largest carmaker expecting growth to hit double digits in fiscal 2017 and repeat the performance the following year as well.
The company has told component vendors to be ready with supplies for production of 17.25 lakh to 17.30 lakh vehicles in fiscal 2018 starting April, people in the know said. In the first 11 months of fiscal 2017, it sold 13.1 lakh vehicles in the domestic market, a nearly 11% increase from a year earlier.
The Society of Indian Automobile Manufacturers predicts the passenger vehicle industry to expand 6-8% in fiscal 2017. SIAM has yet to announce its outlook for fiscal 2018, but at a recent looking-ahead conclave, it predicted growth rate to be similar to this year, a person in the know said.
Next year, parent Suzuki Motor will commence manufacturing at its 2.5-lakh-a-year car factory in Gujrat, from where the entire production will be supplied to Maruti. With a plan to export 1.25 lakh units, its domestic sales may cross the 16 lakh milestone in fiscal 2018.
Chairman RC Bhargava, however, said Maruti has yet to finalise its plan for next year. But with the company all set to grow in double digits in fiscal 2017, and economic growth gaining momentum, there is no reason why it cannot repeat the performance, he added.
“The economy will continue to improve unless something unexpected happens… and that is always good for the car business,” Bhargava told ET. Despite the disruption caused by demonetisation, the company has still done well with an over 10% expansion so far this fiscal year, he said. “We are optimistic about this growth to continue next financial year. We could in fact do more; our growth is limited by capacity.”
A person associated with the company said after a little hiccup in December due to demonetisation, January was back to normal for the industry and in February, a majority of the players registered growth and Maruti has done particularly well.
Maruti’s new models are doing extremely well and it also has a strong pipeline of products, giving it confidence about future sales.
Maruti is sitting on 1.42 lakh units of cumulative bookings for the Baleno, Vitara Brezza and Ignis, with the waiting period running into six to eight months. There are about 80,000 bookings for the Baleno, about 50,000 for the Brezza and the rest for the Ignis.
The Gujarat plant is expected to ease Maruti’s capacity constraints and allow it to sell more of the Baleno and Brezza.
Maruti is also building on its network: it is adding about 250 dealerships, including 50 Nexa outlets that sell premium products. Meanwhile, the strong showing and forecast at the sales front is expected to get reflected in earnings projections as well. Stock analysts are pricing in volumes of 16.75 lakh and 18.88 lakh units for the FY18 and FY19, respectively.
The company’s internal estimate of higher volume could lead the analysts to change their forecast by 3-4%. This means earnings growth estimate of more than 15% for both FY18 and FY19 is likely to be revised higher.