Maruti feels heat as Q1 profit dips over 25%
The Indian auto giant Maruti Suzuki is facing a tough phase in its domestic market as its profits are shrinking due to the increased royalty by its Japanese parents and rising competition in its strong hold segment of small cars. The company has recently disclosed its Quarter 1 net profits for the financial year 2010-11, in which it reported a fall of 20.25 per cent in its net profit at Rs 465.36 crore during April-June 2010 as against Rs 583.54 crore during the same period last year.
With this, the total market share of the company fell below the crucial 50% mark during the sales of the first half of this year. Maruti Suzuki's market share dipped to 46% percent during Jan-June period from the 54% for the same period last year.
In the last six months, many major auto makers have launched their new cars in the compact car segment in India which has always been a strong-hold of Maruti Suzuki. The recently launched compact cars like Chevrolet Beat, Ford Figo, Volkswagen Polo and Nissan Micra are not only offering comparatively more stylish looks from its Maruti counterparts but also come featured with all new generation safety and comfort features. So far, the main factor which drives the buyers towards Maruti cars in India is the considerably low maintenance cost and best after-sale-service. But the trend seems to have been changed considerably in the last few months as more and more car makers are not only increasing the use of local content in their cars in India but also expanding their car servicing network so that they can offer a much more efficient after-sale-service to its customers.
Moreover, Maruti Suzuki India Ltd in which the Japanese Suzuki Motors is a principle stake holder with 54% share in the partnership, pays an heavy amount as royalty to its Japanese parents.
However, the company is doing every bit to save its threatened kingship in the Indian auto market. It has recently planned to set-up as much as four vehicle stock-yards in the country so that a large number of its cars can be stored and the waiting period of its cars can be decreased significantly. With this, the company is also adopting a strategy of launching upgraded versions of its best selling cars in India like Maruti Alto and Wagon R so that the dominance of these cars can be maintained.