Maruti Suzuki Margins Jump On Price Hikes, Sees Chip Supply Improving

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Maruti Suzuki which sells every second car in India, also said it sees the chip-shortage crisis improving in the current quarter which it hopes will help ramp up production to close the gap on pending orders.




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Maruti Suzuki sees the chip-shortage crisis improving in the current quarter.

Shares of India’s top carmaker Maruti Suzuki surged more than 7 per cent on Tuesday as a series of price hikes, to offset high material costs, improved margins despite a fall in third-quarter profit. The company, which sells every second car in India, also said it sees the chip-shortage crisis improving in the current quarter which it hopes will help ramp up production to close the gap on pending orders. However, it added that may not still be enough to reach full capacity.

“Though still unpredictable, the electronics supply situation is improving,” Maruti said in a statement, adding it has more than 240,000 pending orders.

Maruti’s earnings before interest, taxes, depreciation, and amortisation (EBITDA) margin, a key measure of profitability, was 6.7% for the quarter, above analysts’ estimate of 6.2%, according to Refinitiv IBES data.

The company’s shares rose to their highest level since September 2018.

Maruti, majority owned by Japan’s Suzuki Motor Corp, posted a bigger-than-expected 48% drop in third-quarter net profit as production slowed amid the chip shortage and high raw material costs.

Carmakers, having closed plants or operated at reduced capacities during the height of the pandemic, are competing with the consumer electronics industry for chips – a critical component in electronic devices.

The shortage cost Maruti an estimated 90,000 vehicles in lost production last quarter, the company said.

Raw material prices and shipping costs have also spiked due to supply chain disruptions, and carmakers have attempted to pass on some of these costs to customers. Maruti hiked prices at least four times last year.

Maruti said unit sales fell to 430,668 vehicles from 495,897 cars a year earlier.

Profit was 10.11 billion rupees ($135.43 million) for the three months ended Dec. 31, compared with 19.41 billion rupees a year earlier. Analysts had expected 10.58 billion rupees. Total revenue from operations fell 1 per cent.

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