Shashank Srivastava on May sales, CNG demand & airbag mandate

If one looks at the pending bookings that have been increasing for Maruti Suzuki, it is about 295,000 at the moment and for the industry it would be about 525,000 pending bookings. So yes, right on the demand side, things seem to be stable. However, going forward, we have some headwinds and we are monitoring these very closely. Hopefully, we would continue to have stable demand. At the moment, we have to monitor the situation closely going forward.

What could be the impact of the six airbags mandate by the ministry on sales and consumers? How much of a price hike will this move lead to the hatchback category?
We do not know the regulation yet. It will be premature for me to comment on it, but if six airbags have to be added, there is a cost challenge which pushes up the prices, especially on the lower end of the market for cars. It would have an adverse impact as far as affordability is concerned.

The high cost of fuel at the pump seems to have led to a shift in demand with CNG variants of your vehicle seeing higher demand. How did CNG sales fare in May?
CNG continues to be very strong. We have a large weighting in CNG vehicles. In fact, out of those 295,000 pending bookings, about 130,000 are CNG vehicles and the demand has been increasing. Last year, we did about 235,000 sales for CNG, the previous year was 162,000.

There has been a steep increase and we see that as long as the fuel prices continue to be high, the expectation will continue to be high. CNG is an extremely good option both from an environment perspective and also from the cost of running vehicles’ perspective. So CNG demand will continue to hold. In April and May also CNG has been doing very well. In fact, we do almost 30,000 cars a month from CNG and we have nine models.

A lot has been done by the government over the last few weeks and one of them was what they had done with the steel prices and also in order to curb the domestic prices. Could you talk to us more on that? Has the contracts been revised with manufacturers or is the company still in talks with them?
Tell you how it works; generally the contracts are done quarter wise by OEMs, the quarter wise contract is dependent on the spot prices of steel in the previous quarter. We would have heard that recently the government has increased the export duty for steel for domestic manufacturers and also a reduction of import duty on some of the materials that go into making of steel.

So expectedly, the spot prices are coming down, not by a great number but still coming down. That will be reflected in the contracts that OEMs will have for the next quarter with the steel manufacturers. I am afraid that if you look at steel prices they still will be high especially if you compare with the pre Covid levels about 38/kg had gone up to about 82-83. CR steel may come down by Rs 7-8-10 but still will be very high compared with the Rs 38/kg that we saw in pre Covid times.

What is the target for the first quarter of the current financial year?
I will not be able to give future guidance, except that last year when we did exports of almost 2.38 lakh cars. We hope to go at the same rate this year as well. Maruti is the largest exporter of cars and we hope to continue in this year as well.

Let us talk about the demand. Have you seen any improvement in the entry level demand given that the government has gone ahead and slashed the excise duty on fuel resulting in a decrease in the fuel prices in the markets? Has that trickled down to the demand?
Fuel prices still remain high and over the years, there has been an increase in the prices across all segments but the sensitivity of demand in the lower end to price increases is quite high and therefore we have seen some decline in the entry level cars. However they continue to be very large. Hatches are still about 40% of the industry, which is a pretty large segment still.