India's top carmaker Maruti Suzuki sees demand improve amid virus resurgence

BENGALURU: Maruti Suzuki India Ltd said on Tuesday a fresh surge in coronavirus cases in the country would strengthen demand for personal mobility, and that lockdowns in some cities had not yet hurt the carmaker's sales or production.

Following a steep fall in car sales last year when the pandemic first hit, Maruti's sales picked up as people opted out of public transport and poured their lockdown savings into big-ticket items such as cars.

Still, Maruti's fourth-quarter results took a hit due to rising commodity prices and supply chain disruptions, with its EBITDA margin slipping to 8.3% in the March quarter and falling short of analysts' estimate of 9.1%, according to Refinitiv data.

"With this second wave the demand for personal transport will, if anything, strengthen, not weaken. More and more people will want to have their personal transport," Chairman RC Bhargava told reporters after Maruti posted a near 10% drop in quarterly profit.

Maruti is keeping a close eye on the impact of rising steel prices and government orders limiting the use of oxygen by industries, Bhargava said, adding that this would make it difficult to provide a sales outlook for the current fiscal year, though he expects growth.

Maruti, like other carmakers, is also hurting from a shortage of semiconductor chips, which has forced many carmakers including Volkswagen and General Motors to slash production.

Analysts, however, said Maruti is better positioned than its rivals as it is not dependent on a single vendor for chips.

Bhargava said while the semiconductor crisis is not over and it is difficult to predict what happens next, Maruti has so far managed to maintain production by finding alternatives. He didn't offer details.

Rival Mahindra and Mahindra has warned about a hit to its production and sales due to the shortage, while Tata Motors last week said that output at two Jaguar Land Rover's British car factories will be temporarily halted.