Maruti bets small cars will gain from SUV ride

livemint.com:

Maruti Suzuki India Ltd, which dominates India’s small car segment, is urging dealers to stock up on hatchbacks, as the country’s largest carmaker anticipates a positive impact from its expanding sport utility vehicles (SUVs) portfolio. The move comes amid muted demand for hatchbacks, which has led to ballooning inventory and tied-up working capital at small car dealerships, two people aware of the matter said on condition of anonymity.

Simultaneously, it has also started streamlining production of small cars, as supply chain challenges, which had hindered production of its feature-rich SUVs, are gradually easing, they added. However, following a lean period of two-and-a-half years with minimal inventories, with semiconductor shortages restricting supplies, auto dealers are now faced with yet another challenge, having to cope with up to 60 days of stocks at showrooms.

Besides, dealers are also grappling with additional funding requirements as small car manufacturers such as Maruti Suzuki associate specific dealer metrics and goals with the sale of small cars such as the Alto. It is also bundling dispatches of “hot-selling" models, including new SUVs, with hatchbacks that are in low demand, said a Delhi-based dealer.

“We expect the supply-side push to continue and inventories will take three-four months to normalize. Maruti Suzuki, which dominates the small car segment, is pushing sales to protect the market share it is generating from the sale of its new SUVs, and delivering profitability, as its cost structures for small cars are a lot more attractive than its competition," the dealer added.