Maruti Suzuki Sales Down by Over 50 Percent

Maruti Suzuki, India's top automobile manufacturer, has sold less half the number of cars it did this time last year. This is largely due to the labor unrest that has cost the company roughly $500 million in lost production; the problem has been compounded by a demand slowdown in Asia's third-largest economy.

The company, 54.2 percent of which is owned by Japan's Suzuki Motor Corp. ended almost two months of labor strikes recently, and lost time in the production of 80,000 cars. In a statement released by the company, it was estimated that as many as 40,000 cars were lost in production during October. Its market share has shrunk to 40 percent, dropping by more than 10 percent in a year. Maruti sold 55,595 cars in October, down 53.2 percent from a year ago. In addition, last week the company said that profit in the quarter to end-Sept. had more than halved from a year earlier.

The demand in the country for automobiles, in recent months, has slowed, with high interest rates and rising fuel costs deterring buyers. Sales figures are usually driven by a burgeoning middle class and about three-quarters of all new cars sold are financed by banks and other financial institutions.

Sales fell in July in Maruti's first monthly decline in nearly three years and continued to slide through August and September. The unrest at Maruti began days after the launch of a revamped model of its popular Swift model and hit production during India's festive season - a period where manufacturers traditionally witness a sales boom.

Rivals such as Tata Motors and Mahindra & Mahindra have benefited from Maruti's woes, with Tata posting a 22 percent increase in sales in September, growing its market share to 16.4 percent from 15 percent last year. Having swelled at a breakneck 30 percent in the fiscal year that ended in March, Indian car sales are now expected to grow only between 2 and 4 percent for this fiscal year, the Society of Indian Automobile Manufacturers said last month.

The Reserve Bank raised interest rates again last week, for a total hike of 375 basis points since March 2010.