Maruti Suzuki: New models lose sheen; small-car revival critical

13 Dec 2023 , 03:13 PM

Maruti had a busy launch pipeline in the last 1.5 years, which helped the company regain share in the UV category. However, the excitement related to new models is beginning to come off. Waiting periods are shrinking; dealers are giving out discounts on some of them. Analysts of IIFL Capital Services feel Maruti’s UV market-share gain from the current model-cycle may have peaked. Even as Maruti’s UV market-share inched up, the industry mix became more adverse. UVs now account for ~60% of the PV industry vs 52% in FY23. Maruti is under-represented in UV compared to non-UV. As a result, Maruti gained less than 1% market share in FY24, on an overall PV basis. As analysts of IIFL Capital Services look ahead, Maruti has a relatively lean new model pipeline. Resurgence in the non-UV category (especially, low-priced hatchbacks) is critical for Maruti’s growth. 

Industry growth tapering down; order book shrinking: 

PV industry growth is tapering down, especially after the festive season. The industry clocked strong growth in the festive season, but this was partly supported by an existing order book, which is depleting fast. Maruti’s order book has come off from 412k at the end of 4QFY23, to 250k in Oct; further down in Nov. Dealer inventory for the industry post the festive season was higher than normal; OEMs are in destocking mode. New models – sheen coming off? Maruti launched four new UVs in the last 1.5 years (excluding the new-generation Brezza). These have helped Maruti regain share in the UV category, from a low of 18% in FY23 to 26-27% share in recent months. However, waiting periods for these new models have come off; dealers are giving out discounts on some of them. As a result, analysts of IIFL Capital Services feel Maruti’s market-share gain in the UV segment from the current model-cycle may have peaked. 

Recovery in Hatchbacks critical for market-share gains, growth: 

Despite 8-9% gain in UV market share in FY24, Maruti’s overall PV market share has inched up by less than 1%. This is due to further industry shift towards UV (now at ~60%). Hatchback segment, in which Maruti has 65% share, is still at 0.75x of FY19 peak. On the other hand, UV category is at 2.5x FY19 levels. As income distribution becomes more broad-based, analysts of IIFL Capital Services expect the first-time car-buyer to come back into the market, and revive the Hatchback segment. If and when it happens, Maruti will be the biggest beneficiary.