Maruti Sees Chip Hurdle Continue In Q1

“The kind of improvement we were expecting hasn’t happened," he said, adding that the situation this quarter looks comparable to the same quarter last year, implying that sales in the quarter shouldn’t be negative on a yearly basis.

“We should comfortably cross the 2 million mark in annual production this fiscal—and how much further we can grow will be largely determined by what the semi-conductor industry does to help us produce more vehicles," he said. The number of chips required per vehicle has gone up due to the addition of features in the company’s newer cars, mirroring a larger trend in the industry.

“Last year we lost production of 170,000 vehicles. This year the number should be less—the indications are we should be able to do better," Bhargava said.

“We still don’t have the whole visibility for the year so we cannot make a clear comment on [what our production loss will be this year]. The first quarter of this year there is still some constraint on semi-conductor, but I hope the situation will be better from second quarter," Hisashi Takeuchi, managing director, Maruti Suzuki, told Mint. “Semi-conductor visibility is only a few weeks, it’s difficulty to make an estimate this time."

Maruti Suzuki has a total orderbook of 412,000 units, a third of which are CNG models. The carmaker emphasized that it expects to see no growth in small car segment in FY24 compared to last year, pointing to a stagnation of demand. However, Maruti has focused on SUVs, where it is gunning for a 25% market share by end of the fiscal year.

“The fact that we are expanding production shows that despite what has been happening to the small car segment, there is enough strength in the market for us to grow," Bhargava said.

The outlook for small cars continues to be somewhat negative, he said. The market is now certainly much stronger in the SUV segment.

“The semi-conductor situation is a little worse than the last quarter. But it is not worse than it was in the first quarter last year, so it’s about the same," Bhargava said.

Toyota, Suzuki’s global alliance partner, halted new bookings for the top-end trips of its Innova Hycross hybrid owing to supply chain constraints earlier this year. Toyota will supply the SUV to Maruti Suzuki, too, although the latter will sell the SUV with a new badge under its own brand. The launch is expected in two months, following commercial roll-out of Suzuki off-roader Jimny.