Maruti Suzuki posts first drop in profit in 4 years

India’s largest automaker Maruti Suzuki on Thursday posted a surprise 9.8% drop in net profit for the quarter ended September (Q2) 2018—its first drop in profit in the past 18 quarters.

Its profit in Q2 went down to Rs 2,240 crore, from Rs 2,484 crore a year ago due to higher commodity prices and a weaker rupee.

Sales, including domestic and exports, during the quarter fell 1.5% to 484,848 over the same period last year.

The company, while addressing the media, said that rising fuel costs globally and the change in insurance norms have hit the demand. Recently, there was an increase in insurance premium, which costs customer around Rs 9,000 more at the time booking. The company also said that a lack of policy clarity on diesel cars is also affecting sales.

The automaker was on the cover of Fortune India magazine's October issue.

“In the second quarter, our sales numbers have not increased, turnover is also marginally below compared to last year—which leads to the question why this kind of thing is happening? Prices of international crude oil have a significant impact on India. We had committed for a 10% growth this year. We will continue to make our best efforts to achieve this figure,” said R C Bhargava, chairman, Maruti Suzuki, in his address to the media.

Bhargava credited petroleum minister Dharmendra Pradhan for his recent announcement on constructing 10,000 compressed natural gas (CNG) stations in India in the forthcoming decade.

“The government has changed its priorities in the CNG usage. That’s because they have recognised the quickest way to reduce the import of crude oil is to switch to CNG vehicles. This indicates what the government would like the industry to do...Maruti is also ramping up its CNG production. We have eight CNG models available with us,” he said.

“We’ll reach roughly 10 million by 2030. No company in the world is growing at this rate. Because of this increase in vehicles, import requirements will also increase until something is done. That’s where CNG and hybrids come into the picture.”

Shares of Maruti Suzuki on Thursday closed 43.85 points, or 0.70%, lower at Rs 6,724.70 on the BSE, while the benchmark Sensex closed 1.01% or 343.87 points down at 33,690.09 points.