Softening of demand in domestic mkt, measures abroad may impact value creation

New Delhi: Maruti Suzuki India (MSI) has said headwinds like softening of demand in the domestic market and protectionist measures abroad may impact its ability to create value in the short term.

The company, which has over 50 per cent market share in the domestic passenger vehicle industry, has been impacted by sluggish offtake and has seen total sales drop 33.5 per cent in July at 1,09,264 units.

"India has already become the fifth largest car market in the world, though car penetration rate remains reasonably low at 3 per cent, with the country's population exceeding 1.3 billion people.

With economic growth, the low penetration offers a good growth opportunity to the automobile market and the company," MSI said in its Annual Report for 2018-19.

However, in the short term there are certain headwinds that might affect the company's ability to create value, it informed shareholders of the company.

"These include slowdown in consumption leading to softened demand in domestic market, weakening of Indian economy due to protectionist trade measures adopted recently by various countries, uncertainty in commodity prices and foreign exchange fluctuations," it added.

The company will, however, continue to work on the necessary enablers to tap opportunities in the medium and long term, MSI said.

"These include strengthening its customer-centric culture, expanding sales and service network, increasing manufacturing capacity, investing in new products and technology, augmenting capability and skills of employees and inculcating green manufacturing methods," it added.

Terming the weak demand situation as unfortunate, MSI Chairman R C Bhargava said the company needs to recognise that such downturns do happen from time to time all over the world.