The plight of India’s largest car maker causes Japanese giant Suzuki’s first revenue decline in three years

• Suzuki Motor Corp (SMC) chairman Osamu Suzuki said he expects the impact of the Covid-19 pandemic in India to be more drawn out than he initially expected.
• Parent company SMC also saw its revenue decline by 9.9% to 3.49 trillion yen (₹2.45 trillion) in its Q4 ended March 31.
• Maruti Suzuki share price declined over 15% since the beginning of March, till date.

According to Citi, Maruti Suzuki's parent company Suzuki Motor Corp (SMC) chairman Osamu Suzuki said the impact of the Covid-19 pandemic in India to be more drawn out than he initially expected. He said this in a post-earnings investor call on Tuesday in Japan.

Parent company SMC also saw its revenue decline by 9.9% to 3.49 trillion yen (₹2.45 trillion) in its Q4 ended March 31. This is the first time the company has reported a decline in three years.

SMC said the drop in its operating income was due to the slump in India sales and unfavourable forex movement as an impact of Covid-19.

India's largest carmaker Maruti Suzuki accounts for over half of SMC's global sales by volume.

On March 22, the government announced a nationwide lockdown to deal with the COVID-19 pandemic and Maruti to halt operations until May 12 when the Manesar plant reopened.

Since the beginning of 2020, Maruti Suzuki's share price has taken a massive hit because of the coronavirus pandemic, subdued sales and shutting down of showrooms and factories.

The share price declined over 15% since the beginning of March, till date. However, the stocks are now recovering— it is up over 8% since May 12 after Maruti resumed operation in its Manesar plant.

Although the coronavirus lockdown period was just for one week in the relevant period, the car giant saw a steep 16% decline in sales due to bad market sentiment. And, the company reported a 28% fall in its standalone net profit to ₹1,291.70 crore for the fourth quarter ended March 31.

At the same time, the margin shrank as costs did not fall with the sales. The company had to pay for salaries, materials and advertisements even though the demand for cars remained weak. The company statement also blamed a one-time hit due to the discontinuation of BS-IV models.

In a desperate measure, Maruti is now also offering home delivery of cars. Customers can choose the model, colour and accessories online and the car will be delivered at home. “All staff visiting the customer's home will follow safety protocols – including wearing masks and carrying sanitizers. All cars will be fully disinfected before delivery. In case of delivery from showrooms, limited persons would be encouraged,” said the company’s statement.

SEE ALSO: As expected, Maruti Suzuki’s profit falls 28% as slow sales hit productivity while costs remained steady

An earlier version of the story had factual errors which have now been corrected.