Maruti Suzuki SUVs have surpassed competitors, but dominance is another matter
₹4,685 crore but missed analysts’ estimates. More importantly, the Ebitda margin of 12.3% trailed consensus estimates of 12.8%. The margin miss was led by a one-off 60-basis-points impact related to CSR and material costs, coupled with reduced CNG vehicle production owing to a shortage of components.
The lower CNG mix (26.9% in Q4 from 30.8% in Q3) and higher share of entry-level vehicles also weighed on the company’s average selling price (ASP), which dropped 1.5% sequentially to ₹6,54,672. CNG forms a key component of Maruti’s operational flywheel. CNG vehicles have higher selling prices and margins than Maruti’s mainstay, mini and compact vehicles (which account for 52.4% of its total sales).
The company commands a 70% share of the CNG vehicle market and around 20% of its overall sales come from CNG models. While analysts are confident that the lower CNG mix will reverse this quarter, the bigger risk to the company is the raging trend in SUVs, which shows no signs of cooling. From less than 30% in FY18, SUVs now account for the biggest portion of the domestic car market at 50.4%.
Robust demand for SUVs made India the world’s third-largest passenger-vehicle market in FY24, with sales crossing 40 lakh for the first time. Maruti Suzuki, which ushered in the small-car revolution in India, was initially caught unawares by the SUV craze. As late as 2022 its share in the SUV market was a paltry 9.5%, even trailing South Korea’s Kia, which had entered the market only in 2019.
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