Maruti’s sales numbers for the month of December confirm that the passenger car segment remains a growth area. This segment is an exception in the automobile segment, where commercial vehicle and two-wheeler volumes were disappointing in FY08.
After a year-on-year growth of 15.4 per cent in October 2007 and a whopping 26.6 per cent in November, the December sales growth of 9.7 per cent appears slightly tepid. But that’s because of Diwali purchases in November.
Even in terms of absolute numbers, the company had sold a record 65,216 vehicles in November, while December sales were lower at 62,515 units.
Domestic sales grew slower in December at 6.9 per cent, while the export growth was a robust 75 per cent. The growth in its key A2 segment, comprising Alto, Wagon-R and Swift, was low at 2.9 per cent.
The A3 segment grew by 54.7 per cent, thanks to higher SX4 sales. Maruti’s sales have been an impressive 18.5 per cent for the nine months ended December 2007, with domestic sales growth of 16.7 per cent.
The A3 segment grew at the rate of 61.4 per cent and A2 segment was up by 20.2 per cent in the same period. Exports have grown by over 50 per cent this year, though they account for just over 5 per cent of the total volumes.
The higher raw material costs had resulted in a dip in Maruti’s Q2 FY08 operating profit margin by a yearly 80 basis points and quarterly 150 basis points to 13.1 per cent. Going forward, the passenger car segment is going to be in the spotlight.
Steel prices are going up, and though car companies will raise prices this quarter, margins are going to be under pressure, as has been indicated by Maruti’s managing director. Also, Tata Motors’ small car will be unveiled next week.
The Maruti stock has been an outperformer within the sector. It grew 19.7 per cent in the first eight months of FY08 compared with 12.6 per cent in the passenger car industry. Maruti trades at about 13 times FY09 earnings, and should do well.
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