India’s largest car manufacturer said today that it will take some time to get back on track as labour shortages are addressed and production is reduced through measures to combat social exclusion.
At the moment there is too much uncertainty to predict when the recovery will take place, said R.C. Bhargawa, Chairman of the Board of Maruti Suzuki, noting that a significant proportion of the workforce has gone to the villages, affecting production.
It’s not easy to bring back employees who have returned. The new social distance protocols also reduce productivity to some extent, Bhargawa said, and answer the question of how long it will take for the industry to recover.
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The craftsmen, mainly from Bihar and UPm, are the nerve centre of large Indian companies such as Maruti, on which they depend for jobs other than apprenticeship. Most of them had gone to their villages because the blockade had interrupted economic activity, endangering their livelihoods.
The company reported a 28% decrease in net income for the period January to March compared to the same period last year, mainly due to lower demand for its cars, exacerbated by a more than one-month blockage of production and sales.
However, Mr. Bhargawa said he expected the market to recover by the holiday season. The demand during the festival season will certainly be greater than the products of the industry. By then we will be able to adapt to the new safety and distance rules, he said.
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The company’s net sales for the quarter decreased 17.1% to Rs 171.86.7 as a result of a 16% decrease in total car sales for the quarter to 3,85,025 units.
ChartOperating profit for the period decreased by 31.7% to Rs 1,546, while margin decreased to 8.5% due to an increase in total costs of 200 basis points.
However, the Maruti has not yet reduced the planned level of capital expenditure. The company invests Rs. 20-21 Rs. 2700 crores in the current fiscal year. We have to work on the long term. We have full confidence in the economy. We can’t afford to forego capital expenditure this year, Mr. Bhargawa said.
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The car manufacturer will be the first to recover through its strong presence in the entry segment of the market, as people will own a car to maintain a social distance, but will not be able to afford a higher class car because of the wage cuts and job losses that are increasing. Categories such as economy and 2W, boarding cars, tyres and batteries are expected to recover in the second half of FY 21, according to analysts at Dolat Capital.