We shall comfortably cross the 2 million mark, how much more we deliver will be largely determined by the semiconductor availability, says RC Bhargava in an interaction with the media, post the FY23 earnings.
27 Apr 2023 | 15092 Views | By Ketan Thakkar
R C Bhargava, Chairman of Maruti Suzuki says despite economic headwinds, component shortages, and loss of production, the overall performance for Maruti Suzuki in FY23 has been much better. With the slew of new SUV launches in the last financial year, Maruti Suzuki will be looking at outpacing the market ...
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R C Bhargava, Chairman of Maruti Suzuki says despite economic headwinds, component shortages, and loss of production, the overall performance for Maruti Suzuki in FY23 has been much better. With the slew of new SUV launches in the last financial year, Maruti Suzuki will be looking at outpacing the market in FY23.
Speaking to media post FY23 earnings, Bhargava announced that the company has got an in-principle approval for an additional one million units capacity, which will call for an investment in excess of Rs 18,000 crore it plans to invest for Kharkhoda facility in Haryana.
Maruti plans to launch 6 EVs by 2030 and it expects its exports volumes to grow to 7.5 lakh units by the end of the decade.
Review of FY23
RC Bhargava spoke about how FY23 had been a much better year than the previous one, despite headwinds such as high interest rates, inflation, surge in commodity prices etc. He mentioned how the fluctuation in the semiconductor situation had caused a loss of production.
He recognised the role of the government and the Reserve Bank of India in tackling these issues in a manner that enabled the country to perform much better as compared to other countries.
RC Bhargava spoke about a major landmark of how they had crossed the Rs 1 lakh crore turnover, as a result of which profits have more than doubled and they have been able to declare the highest ever dividend.
RC Bhargava said that they were just 34,000 vehicles shy of meeting the two million target, largely due to the non-availability of semiconductors.
On the prospects and challenges of FY24
RC Bhargava said that FY24 would continue to see issues related to semiconductors and that hopefully, the next three quarters would be better in terms of supplies. He expressed optimism in the ability to grow faster than SIAM’s forecast of 5-7% on the back of the new SUV launches. He said that they would comfortably cross the 2 million mark, and how much more they can deliver, will depend on the availability of semiconductors.
View on the demand momentum
Coming to the demand side, the Chairman of Maruti Suzuki said that the company had a back order of over 4.12 lakh. “The production of a car is a bigger issue than finding a buyer to sell the car,” he added. Moving on to addressing interest rates, he said that the general expectation was that the interest rate cycle would start reversing, and one way to achieve this was for the economy to grow faster.
He spoke of how Maruti Suzuki was expanding its production capacity, despite what has been happening to the small cars segment, and there are a number of strengths in the marketplace, where they could grow, adding that limitation of supplies hindered their growth.
Semiconductor challenges
He said that during Q4, Maruti Suzuki had lost about 38000 units. We have lost 1.7 lakh vehicles in FY23, this year the number will be less. The present indication is that the numbers will be better and it should be less than 1.7 lakh, but it was difficult to predict.
Citing the semiconductor situation as ‘a little worse’ in Q1FY24 than the last quarter, he said that the loss in Q1 may be the same as the production of Q1 of FY23, hopeful that the situation would be better than the second quarter, adding that visibility was still a challenge.
Plans for another million units
The Chairman is hopeful that besides Kharkhoda, there is potential of about a million more units, and that it will boost annual production capacity by 1 million vehicles, following an in-principle approval from the board. He further added that financing would be done from internal reserves and that money would not be borrowed for both these expansions.
“We want to be ready to put in more capacities in a short period of time if the market requires it, we don’t want to be caught napping if the market suddenly develops and we are not ready.” Bhargava said.
Role of exports
In FY23, exports went up to 2.9 lakh units and for the second consecutive year, Maruti Suzuki was the largest exporter of cars. The company estimates that by the end of 2030, exports could reach as much as three quarters of a million cars, a substantial volume, which is equal to the Suzuki Motor Gujarat capacity.
On future product plans
“The outlook for small cars continues to be negative, I don’t see much changing in that respect, the market is much stronger in the SUV segment,” Bhargava said. One new change we will see in FY24 is that we will be sourcing all new products from Toyota, it will be a strong hybrid, and it will be a three-row vehicle, and top of the line vehicle. I don’t think the volume will be large, it is a path-breaker vehicle in a sense, it will be carbon friendly and with Toyota's technology, it will be launched roughly in two months or so”, he added.
He further stated that these volumes may not be large, adding that today the same vehicle that Toyota has launched has a booking of over 12 months waiting. How many vehicles we will get from them, will also depend on their capacity and also their needs.
The roadmap and future EV ambition
By the end of 2030, the company will be introducing 6 different models, and electric vehicles would largely be in the SUV category, though they were moving in other categories as well.
“The fear that Maruti is slow in moving to EV is not going to make a difference, these vehicles will take a large market share in those segments,” RC Bhargava added.
Is there a need for a dedicated EV factory and what about localisation of batteries?
RC Bhargava said that Maruti Suzuki would continue to make batteries in India, and that localisation was already happening, adding that a dedicated EV plant would be needed if the volumes swelled to 1 million units. “We feel the battery plant and EV plant should be close to each other, that is one of the considerations. Decisions will be taken based on what is the most efficient way of producing it,” he said.
CAPEX plans for FY24 and cash balance
Last financial year the company invested around Rs 6,329 crore and this year the plan is to invest Rs 8,000 crore.
Fall in market share?
Talking about market share, he said that it was dependent on external factors and the company’s intention would always be to get close to 50% market share, which they enjoyed in the past. The company’s SUVs account for 43% of the overall market and having launched a number of vehicles in that segment, they would continue to grow the same way, since this is where the market was moving.
Path to carbon neutrality
Reiterating his stand on the mix of technologies, he said that India would need a mix of both to expedite the goal of achieving carbon neutrality. “My views remain, India will need a mix of technologies to expedite and move faster towards carbon neutrality - relying on one technology will never get us to our destination faster, as the mix of technology will,” he stated.