October 25, 2018 / 8:35 AM / 24 days ago

Carmaker Maruti Suzuki may struggle to hit sales target as profits slide

NEW DELHI/BENGALURU (Reuters) - Maruti Suzuki India may find it tough to meet its 10 percent sales growth target for the current fiscal year, its chairman said, after the carmaker reported a fall in quarterly profit for the first time in more than four years.

Corporate office of Maruti Suzuki India Limited is pictured in New Delhi, India, February 26, 2016. REUTERS/Anindito Mukherjee/File Photo

India is the world’s fastest-growing major car market but high global oil prices, rising interest rates and a weaker rupee has dented sales growth. Rising car insurance costs could also hit sales.

Maruti, which sells one in every two cars in India, reported a 1.5 percent drop in sales in the July-September quarter to 484,848 vehicles.

“We will continue to make best efforts to achieve the target this year ... but it will not be an easy task,” Chairman R.C. Bhargava told reporters in New Delhi on Thursday.

Bhargava said sales for India’s festive season, which started this month, are yet to pick up.

“The festival season does not seem to be showing any kind of great buoyancy over last year ... sales may be only marginally different from last year,” he said, adding that the carmaker has increased discounts to push sales.

Big-ticket spending tends to rise ahead of major Indian festivals like Diwali that typically falls in the month of October or November.

Maruti, majority owned by Japanese car maker Suzuki Motor Corp, reported a 9.8 percent drop in second-quarter net profit - the first year-on-year fall in 18 quarters.

Net profit fell to 22.40 billion rupees ($305.76 million) in the quarter ended Sept 30 from 24.84 billion rupees last year. Analysts on average had forecast a profit of 20.28 billion rupees, according to Refinitiv estimates.

A weaker rupee shaved 120 basis points off Maruti’s margins for the first half of the current fiscal year, its chief executive officer, Ajay Seth, told reporters.

The carmaker, whose iconic Maruti 800 nearly four decades ago helped spur car ownership in the country, sells a range of vehicles including the Alto hatchback, Ciaz sedan and the S-Cross sport-utility vehicle (SUV).

Maruti provides the bulk of Suzuki’s revenue, and has a market value more than that of its parent at around $28 billion.

Shares of Maruti ended 0.7 percent lower versus a 1 percent fall in the broader market.

($1 = 73.2600 Indian rupees)

Additional reporting by Tanvi Mehta in Bengaluru; Editing by Christopher Cushing/Muralikumar Anantharaman/Jane Merriman

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