These past years in the auto industry have been strange. Plants have shut down over Covid, supplies dwindling to a trickle, yet profits are up. How do they do it? Maruti Suzuki in India makes the case clear. All that and more in The Morning Shift for January 26, 2022.
1st Gear: Maruti Suzuki Profits Up As Sales Down
The continuing refrain from the car industry during the pandemic is that profits are up as sales are down. That is to say, even amid production cuts, car companies have been able to make even more money than ever before. How are they doing it? A Bloomberg report on India’s automotive powerhouse Maruti Suzuki gives a clearer picture:
Maruti Suzuki India Ltd., the nation’s biggest carmaker, reported better-than-expected quarterly income, as higher vehicle prices and cost cuts boosted margins.
Net income was 10.1 billion rupees ($135 million) in the three months ended Dec. 31, compared with 19.4 billion rupees a year earlier, the unit of Japan’s Suzuki Motor Corp. said in a statement Tuesday. The average estimate of analysts tracked by Bloomberg was for profit of 9.1 billion rupees. Revenue of 232.5 billion rupees beat the 231.1 billion rupees forecast.
Maruti shares jumped 6.8% to 8,602.60 rupees in Mumbai, reaching their highest level since September 2018. It was the best performing stock of the day on the S&P BSE Sensex.
The automaker raised prices of some models including its popular Swift last year to help offset higher input costs.
With production slowing due to a global shortage of semiconductors, Maruti said “there was no lack of demand” and 240,000 customers were awaiting delivery of vehicles as of the end of December.
Basically, demand is so high that Maruti Suzuki can raise prices or simply just build higher-priced, higher-profit-margin vehicles and people will fork out the extra for them. That’s the trick! That’s the whole thing. It’s been working in America, and it seems to be working fine in India, too.
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