India's largest carmaker Maruti Suzuki on Tuesday (March 01) reported a negligible growth in sales for the month of February, citing the Jat agitation in Haryana as the main reason for the flat sales.
Due to the ongoing protests by the Jat community demanding reservation in government jobs, Maruti’s total production loss was over 10,000 units.
The carmaker sold 1.17 lakh vehicles in February 2016, down 0.9 per cent compared to year-ago period. Sales of domestic passenger vehicle witnessed a negligible growth 0.2 per cent to 108,115 units last month. This is the lowest sales growth posted by the company in any month this financial year.
Maruti's exports in February contracted 12.4 per cent to 9,336 units.
"During the month, reservation agitation in Haryana had disrupted component supplies, causing a temporary suspension of production. Total production loss due to this was over 10,000 units," Maruti said on Tuesday.
Maruti has a huge manufacturing facility in Haryana's Manesar, about 40 kilometres south of New Delhi. The protests, which began in the second half of February, disrupted rail and road traffic, and led to large-scale violence in many places across Haryana, causing an estimated loss Rs 20,000 crores.
This is the second time in the current fiscal year that the company reported a very slow growth. Maintenance shutdown for a week in the month of January had earlier impacted its sales. The automakers sold 168,303 cars in January, a 0.72 per cent drop from 169,303 a year ago.
Maruti’s entry-level cars Alto and WagonR have been impacted by the mayhem most. Sales of both the cars fell 11.2 per cent to 35,495 units in February. However, sales in the utility vehicle segment increased 44.7 per cent year-on-year to 8,484 units, led by the S-Cross and Ertiga.
Sales of its mid-level and compact segment, including Swift, Ritz, Celerio and Baleno models, remained flat.
With a disappointing result posted by Maruti, which enjoys a 46 per cent share in the domestic passenger vehicle market, and a not-so-friendly union budget, the industry faces a rough road ahead.
In the 2016-17 union budget, Finance Minister Arun Jaitley proposed to increase the cess on passenger vehicles by as much as 4 per cent.
Vinod Dasari, president of the Society of Indian Automobile Manufacturers (SIAM), said the Union budget for the fiscal year 2016-17 is a mixed-bag for the automobile sector.
An additional 1 per cent tax to be collected at source on purchase of cars exceeding value of Rs 10 lakhs will be a deterrent, he said.
Infrastructure cess of 1 per cent on small petrol, LPG, CNG cars, 2.5 per cent on small diesel cars of less than 1500 cc and 4 per cent on other higher engine capacity vehicles and SUVs would be levied with immediate effect.
"We believe this would result in the rise of prices across categories of passenger vehicles and would hurt the industry. With the Government’s focus being rationalization and simplification of taxes, introduction of new taxes on vehicles will only dampen the spirit of the Auto sector," SIAM said.
BW Reporters
The author is Senior Correspondent with BW Businessworld
