Maruti Suzuki’s Shashank Srivastava said that due to supply chain disruption during the COVID and semiconductor shortage issues, production was affected and pent-up demand could not be met.
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Rising interest rates have yet to impact demand for vehicles, but the real situation will emerge once the semiconductor shortage problem is resolved and production is normalized, according to a senior official of Maruti Suzuki India.
With the launch of new products such as Grand Vitara and Brezza adding more to bookings, the company’s backorders rose to 3.87 lakh units from around 2.8 lakh last quarter, said Shashank Srivastava, chief executive. (marketing and sales) at Maruti Suzuki India.
“Theoretically speaking, this should have a negative impact because interest rates are increasing (impacting) discretionary spending, which also includes spending on cars… but at the moment we don’t feel it,” he said in an interaction.
He was responding to a question about the impact of rising interest rates on demand for cars.
Earlier this month, the Reserve Bank of India (RBI) raised its key rate by 50 basis points. This is the third consecutive increase since May, bringing interest rates back to pre-pandemic levels.
Srivastava said the reason the rise in interest rates did not affect demand was because of supply chain disruption during the pandemic and shortage issues of semi -drivers, production had been affected and pent-up demand could not be met.
“…once you have significant production, you will get to know the actual demand pattern…We have not been able to produce under the underlying demand pattern,” he added.
Regarding the issue of semiconductor supply, he said it has improved a lot, but there are still constraints that have prevented the company from operating its production capacity at 100 % and that it is difficult to give a timetable when it will be completely normalized. .
“We don’t have visibility going forward on the exact chip availability,” Srivastava said. In the May-July period this year, the company produced 95% of its overall capacity, compared to 40% in September last year, he said.
“When it will reach 100%, we don’t know. Visibility into the future availability of semiconductors is actually limited. We continue to receive updates every week and we continue to change our estimate, but one thing I can tell you is that in this quarter we will not see 100% normalization. said Srvástava.
The production capacity of MSIL at the factories in Gurgaon and Manesar in Haryana is around 15 lakh units per year. Suzuki Motor Gujarat, which supplies vehicles exclusively to MSIL, has an additional installed production capacity of 7.5 lakh units per year.
Srivastava said the company’s new Grand Vitara SUV has so far received 40,000 orders and supplies will begin in September.
Additionally, he said the new Brezza has received around 90,000 orders, of which around 70,000 are pending. Maruti Suzuki is trying to increase production of the model to over 10,000 units per month, which it did last year.
“There is also a waiting period for the new Ertiga, XL6 and Baleno,” he said, adding that for Baleno the pending orders are around 38,000 units. Regarding the overall growth of the industry, Srivastava said the automotive sector is eyeing record sales for this fiscal year.
“The industry projection was around 3.46 million to 3.52 million units at the start of the year. There seems to be consensus in the industry for it to be revised to 3.6 million to 3.7 million units, which will be the highest ever. The last high was 3.37 million units in 2018-19,” he said.
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