India’s fortunes are tightly intertwined with Maruti’s
₹10,000. Granted that’s just an arbitrary round number, but demand appears strong with a backlog of several lakh orders. MSIL is likely to beat the market in terms of growth.
Its range starts at less than ₹4 lakh for the WagonR and crosses ₹25 lakh for high-end SUVs, which means it now straddles several segments of the market. Sales in June 2023 grew to 1.33 lakh vehicles, representing 40% marketshare and 8.4% growth over June 2022, when it sold 1.22 lakh vehicles. Overall, car sales grew to 3.28 lakh, up 2.5% from 3.20 lakh in June 2022.
MSIL, which can currently build around 22.5 lakh vehicles a year, will increase this capacity by 10 lakh with ₹8,000 crore of capex in FY24. It also expects a rise in CNG-vehicle orders after the latest price-setting policy, which reduced CNG costs. The company hopes for improved chip supplies after three years of issues but admits that persistent problems may continue to affect production for the next six months.
(MSIL estimated a loss of production of 170,000 units in FY23 owing to chip shortages). But lower costs of rare-earth metals, plastics and petrochemical products should lead to better margins. However, there is strong competition in this space and manufacturing costs could increase if a new airbag mandate is implemented.
There’s another potential shadow on this front, with China placing export controls on two key metals used in semiconductors. This could lead to yet another round of chip shortages. There are rumours that the company is looking at launching a purely electric vehicle with high-end features (550 km range, 60 kWh battery, fast charging and more) in October 2024.
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