Sluggish export markets caused Maruti sales to drop 28%, leading to a drop in overall sales which rose only 5%.

Maruti Suzuki India Ltd is not completely off the hook when it comes to semiconductor shortages. Admittedly, the crisis had a negligible impact on car production in February, even though production fell 14% month-on-month last month.

But according to the automaker, a chip shortage in March could have a significant impact on production. Given that and the healthy demand for passenger vehicles (PV), the automaker’s orders are expected to rise, partly reflecting a lack of production.

Demand momentum in the domestic market remains intact. In February, Maruti’s domestic PV wholesale volume was 147,467 units, up 10% year-on-year and month-on-month. Compared to pre-pandemic levels (February 2019), sales increased by 8%.

Sales of the company’s hatchback segment rebounded slightly year-over-year. In addition, sales of sports utility vehicles (SUVs) are also increasing. Sustained momentum here will help Maruti regain lost market share. According to Kotak Institutional Equities, Maruti’s market share will be around 44% in February 2023, flat year-over-year and up 150 basis points quarter-over-quarter. One basis point equals 0.01%.

However, sluggish export markets caused Maruti sales to fall 28% year-on-year. This led to lower overall volumes, as they were only up 5% year over year. Even so, Maruti’s sales in February were above analysts’ expectations.

On the margin front, there are levers for growth. “Our commodity cost index has been largely flattish over the past month. Moreover, original equipment manufacturers such as Maruti Suzuki, Tata Motors Ltd, and Mahindra & Mahindra Ltd announced about 1% price hike in January – February 2023, which may support some margin expansion, in our view,” said analysts at Nomura Financial Advisory and Securities.

Maruti equity investors will be sure to keep an eye out for the El Niño effect as it could weigh on rural demand. Note that most of the manufacturer’s sales come from the entry-level segment. Maruti Suzuki shares fell 12% on the National Stock Exchange from a 52-week high of 9,769 rupees per share hit in October.