Labour unrest proving costly for Maruti Suzuki

Following the labour unrest at Maruti Suzuki India's Manesar plant, analysts have downgraded their call on MSIL shares from ‘buy' to ‘accumulate'.

The lingering labour dispute at the Manesar facility, which has hampered the supply of its Swift and Dzire models, has compounded problems for Maruti — already reeling under rising acceptance of diesel versions of Ford Figo, GM Beat, VW Polo and Toyota Etios and Liva.

“We have lowered our 2012-13 volume estimates by 4 per cent to 1.46 million by factoring in a 200 basis point lower domestic passenger vehicle market share at 43 per cent for MSIL. On the back of prolonged labour-related issues at Manesar and assuming that normal production is restored by October, we have reduced our financial year 2012 estimated volume further by 7 per cent to 1.26 million,” Mr Basudeb Banerjee, auto analyst, Quant Capital, told Business Line .

Production Hit

The production rate at the Manesar plant has been 500 units assembled a day in the past week against the normal level of 1,250 units. The new Swift has a waiting period of three and six months for petrol and diesel variants, respectively.

The 1,000 basis point loss in domestic passenger vehicle market share since May 2011 to the current 35 per cent is a structural one, denting market share by at least 200 basis points in the long run, Mr Banerjee said.

Another analyst — who did not wished to be named — said he expected the market to grow at 9-10 per cent this fiscal, but Maruti to grow at half the rate.

Competitors Closing In

The launch of the diesel version of Toyota Etios and Liva on September 9 has created much buzz in the market, with the combined booking crossing 4,000 in less than a week. The waiting period is 6-8 weeks on average for both models. Etios petrol has already started crossing monthly sales of 4,000 units, directly affecting the growth potential of Dzire.

According to the research by Quant Global Research, General Motors is the prime beneficiary of the Maruti losing market share.

While there is no waiting period for the petrol models of Beat and Spark (along with cash discount/benefits to the extent of Rs 40,000 this festive season), there is a four-week waiting period for specific colour models of Beat diesel. There is no cash discount on the diesel model but benefits like accessories worth Rs 15,000 are available.

“There are 1,500 pending orders this month, along with 2,000 enquiries in the past two weeks for the Beat Diesel alone. Although we generally see incremental sales of 15-20 per cent during festive season, this time, due to the slowdown, we are expecting incremental sales of not more than 5 per cent. Nevertheless, for Beat Diesel, we are hopeful of seeing 20 per cent incremental sales,” Mr P. Balendran, Vice-President, GM India told Business Line .

Demand for the Polo diesel is robust with a waiting period of eight weeks, despite being priced at a Rs 50,000 premium to the Swift diesel model. Cumulative cash discount/benefit of Rs 40,000 for Polo petrol base model is leading to parity in on-road pricing compared to the Swift petrol base model.

Car portal www.carzoo.com has interesting figures to share in terms of enquiries for different cars, between September 1 and 14 . While Chevrolet Beat grossed the maximum enquiries at 1,110, the all new Swift garnered 292 queries.