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Automobiles

Maruti and Tata sales fall as Indian automakers brace for virus impact

Withdrawal of some diesel models hurts Maruti sales

Maruti's sales took a beating after the company decided to stop production of a few diesel vehicles, according to analysts.

MUMBAI (NewsRise) -- Maruti Suzuki India, the nation's largest carmaker, said its February sales fell after it discontinued certain diesel models, even as a parts shortage triggered by the coronavirus outbreak in China threatens industrywide production.

The Suzuki Motor unit's sales including exports dropped 1.1% on-year to 147,110 vehicles last month, the company said in a statement on Sunday. Domestic sales of Maruti's cars, minivans, and sport-utility vehicles fell 2.3% to 133,702 units, while exports gained 7.1% to 10,261 units.

India's automobile industry is contending with the worst-ever downturn that has prompted companies including Maruti to cut production and fire employees. Demand for automobiles in Asia's third-largest economy has been declining amid a credit squeeze and weak consumer sentiment. India's gross domestic product expanded at the slowest pace in about seven years in October-December.

Maruti's sales took a beating after the company decided to stop production of a few diesel vehicles, analysts said. The key reason for the fall in demand was the discontinuation of diesel versions of Brezza and S-Cross models, Kotak Institutional Equities said.

A shift to the less-polluting Euro VI fuel emission standards starting in April is also expected to keep the industry under pressure in the near term.

India's main automobile industry body, the Society of Indian Automobile Manufacturers, last month, warned that demand is unlikely to improve until the festival season later this year.

Meanwhile, the outbreak of the deadly coronavirus in China that virtually led to a lock out in several of the mainland's cities and provinces, poses fresh hurdles to the industry as it triggered a parts shortage that is hampering the production of several brands.

Mahindra & Mahindra, the maker of Scorpio and Bolero SUVs, reported a 42% slump in February sales to 32,476 units. The company's passenger-vehicles sales plunged 58% during this period.

The unforeseeable challenges on the parts-supply from China has affected the company's supply of Euro-VI vehicles, said Veejay Ram Nakra, Mahindra's chief of sales and marketing for the automotive division. This has hurt Mahindra's billing volume for February, pushing dealer inventory down to under 10 days, Nakra said.

"Going into March, we anticipate the challenge on parts-supply to continue for another few weeks, before we get back to normalcy."

Maruti said it has not been affected the parts shortage. "So far, there seems to be no effect as far as production is concerned but our supply chain team is closely watching the situation," Shashank Srivastava, the executive director for international operations at Maruti, told CNBC TV18 network.

"We are positive about next year. Rural demand has been sentimentally a little better," Srivastava said.

Tata Motors, India's largest automobile maker by revenue, said its domestic sales slumped 34% last month to 38,002. Sales of passenger vehicles shrank 31% during this period.

The epidemic in China and a recent fire at a vendor affected production and wholesale volume of Tata Motors, said Mayank Pareek, president for the passenger vehicles division.

Shares of Maruti added 0.4% in Mumbai trading on Monday, while that of Mahindra gained 0.5%. Tata Motors shares lost 3%, while the benchmark S&P BSE Sensex closed down 0.4%.

--Dhanya Ann Thoppil

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