Maruti Suzuki has a 51% market share in the Indian Car Industry (2019) and is an Industry Leader.
Its rapid growth is well known and remains the envy of many of its competitors.
However in the past one year the stock has given negative returns
So is the Maruti story still intact?
Well lets look into the reasons for Maruti's stock decline.
Its sales have been falling for the past 9 months. Why is this happening - there are meany reasons
a) There has been a lack of availability of car loans over the past one year. Its not easy to get a car loan and even if you do the rates are high. This is because many of the NBFCs (Non Banking Financial Companies) have gone defunct and as a result banks have become cautious - to lend monies.
b) The new emission norms for cars and passenger vehicles come into effect from 1st of April 2020. These are called as Bharat Stage 6 norms and hence car companies have to ensure that all vehicles sold after 1st of April 2020 are less polluting. The new technology is costly - especially for diesel vehicles - and hence the cost of cars will go up significantly. Maruti has taken a decision to stop selling diesel vehicles (small cars) from 1st April 2020. Many car buyers want to wait and but a car only after 1st April 2020. (better second hand value!!)
c) The insurance cost on new cars has gone up significantly after the Supreme Court of India Judgement to charge the buyer - three years of insurance upfront.
d) Many analysts also point to the changing preferences of new age consumers (millennials). Car is not a status symbol or a preference for them.
e) In 2017-18 car sales went up as the monies of the pay commission (revision of pay) monies came into the hand of Govt (Central and state) employees. This is not repeating in 2019 or in near future.
While all of these factors have contributed to the stress of the company - good companies have a way ( maybe better strategy) to recover fast as the demand for cars come back - new purchases should happen from 1st April 2020 onwards.
Maruti's parent is also collaborating actively with Toyota and the company many launch hybrid and electric vehicles in India using the Toyota technology.
The next two years will be crucial and if Maruti is able to get back in the game as the market revives - customers and shareholders will have a lot to cheer.
Its rapid growth is well known and remains the envy of many of its competitors.
Its stock has been a wealth creator.
Maruti Suzuki Stock over the last 5 years
Maruti Suzuki Stock over the last 1 year
Well lets look into the reasons for Maruti's stock decline.
Its sales have been falling for the past 9 months. Why is this happening - there are meany reasons
a) There has been a lack of availability of car loans over the past one year. Its not easy to get a car loan and even if you do the rates are high. This is because many of the NBFCs (Non Banking Financial Companies) have gone defunct and as a result banks have become cautious - to lend monies.
b) The new emission norms for cars and passenger vehicles come into effect from 1st of April 2020. These are called as Bharat Stage 6 norms and hence car companies have to ensure that all vehicles sold after 1st of April 2020 are less polluting. The new technology is costly - especially for diesel vehicles - and hence the cost of cars will go up significantly. Maruti has taken a decision to stop selling diesel vehicles (small cars) from 1st April 2020. Many car buyers want to wait and but a car only after 1st April 2020. (better second hand value!!)
c) The insurance cost on new cars has gone up significantly after the Supreme Court of India Judgement to charge the buyer - three years of insurance upfront.
d) Many analysts also point to the changing preferences of new age consumers (millennials). Car is not a status symbol or a preference for them.
e) In 2017-18 car sales went up as the monies of the pay commission (revision of pay) monies came into the hand of Govt (Central and state) employees. This is not repeating in 2019 or in near future.
While all of these factors have contributed to the stress of the company - good companies have a way ( maybe better strategy) to recover fast as the demand for cars come back - new purchases should happen from 1st April 2020 onwards.
Maruti's parent is also collaborating actively with Toyota and the company many launch hybrid and electric vehicles in India using the Toyota technology.
The next two years will be crucial and if Maruti is able to get back in the game as the market revives - customers and shareholders will have a lot to cheer.
DISCLAIMER : THIS BLOG IS FOR INFORMATION AND NOT TO SOLICIT ANY BUSINESS. PAST PERFORMANCE IS NOT AN INDICATION OF THE PERFORMANCE OF STOCK IN FUTURE. EQUITY STOCK INVESTING IS A WITH RISK INVESTING INCLUDING RISK ON CAPITAL INVESTED. PLEASE TAKE AN INFORMED DECISION BEFORE INVESTING IN A EQUITY STOCK
