By Nandan Mandayam
BENGALURU (Reuters) -Sales of small cars may bounce back in two-to-three years once consumers’ income levels increase, Maruti Suzuki India’s chairman said on Friday, after the carmaker smashed quarterly profit estimates thanks to strong sales of larger and pricier vehicles.
Stubbornly high borrowing rates and inflation that is only just cooling have shrunk disposable incomes.
“Without growth at the entry level and the small car market in a market like India, sustained high levels of growth in the car industry are very unlikely,” Maruti Chairman R.C. Bhargava said in a post-earnings media call.
Small car sales in India used to comprise 85% of overall passenger vehicle sales in fiscal 2019, but a COVID-triggered supply chain crunch and regulatory changes ramped up input costs, making these models unaffordable.
While small cars remain Maruti’s biggest segment by volumes, their sales have been on the decline. Sales from mini and compact cars, including the ‘Alto’ and ‘Swift’ hatchbacks, fell to 43% for the quarter from 58% a year earlier.
Conversely, utility vehicles sales – which includes SUVs and the seven-seater ‘Ertiga’ – made up 32% of quarterly volumes, up from 16% a year earlier.
Maruti reported a profit after tax of 37.17 billion rupees ($446.64 million) for the three months to Sept. 30, well above analyst estimates of 30.08 billion rupees, LSEG data showed.
The company has expanded offerings of hybrid, electric vehicles and other clean technologies to boost sales. Maruti has six hybrid models and will begin production of its first battery electric vehicle (EV) next fiscal.
Bhargava said sales of hybrid vehicles in India could rise if the government decides to narrow the tax gap between them and that of EVs.
Earlier this month, Reuters reported that Toyota – which has a partnership with Maruti’s Japanese parent to exchange parts and products – was lobbying the Indian government to reduce taxes on hybrids by 21%.
($1 = 83.2210 Indian rupees)
(Reporting by Nandan Mandayam in Bengaluru; Editing by Sonia Cheema)