Maruti Suzuki chairman RC Bhargava says customers turning away from diesel vehicles -- after the price differential between petrol and diesel narrowed -- is hurting the industry.
Despite signs of a comeback in economic activity, sales for the auto industry as a whole are still to pick up in any meaningful way, believes Maruti Suzuki India chairman RC Bhargava.
In an interview with CNBC-TV18's Latha Venkatesh and Sonia Shenoy and JP Morgan's emerging markets specialist Adrian Mowat, who doubled up as the news channel's guest editor for the day, the Maruti chief said it would be some time before customers start looking at making fresh auto purchases.
He added that even a turn in the interest rate cycle – with some forecast interest rates to fall a full 1 percent this year – may not single-handedly drive demand as customers pinched during the recent downturn look at the total affordability of a car.
Auto sales for Maruti stood at 11.5 lakh units in calendar year 2014, 8.3 percent higher compared to the previous year, but overall car sales rose only 2.5 percent.
Bhargava further stated that one of the key reasons sales have lagged has been the structural change that was witnessed a few years back when customers flocked to diesel vehicles when petrol prices rose.
"Now that the differential between the two fuels has narrowed to about Rs 10, carmakers focused on diesels have been struggling," he said.
Diesel cars used to traditionally account for about 30 percent of overall sales but the number went up to well over 50 percent for many companies, Bhargava pointed out, adding that Maruti also did well thanks to it being a petrol-focused player.
Maruti Suzuki stock price
On January 21, 2015, at 11:10 hrs Maruti Suzuki India was quoting at Rs 3652.40, up Rs 49.50, or 1.37 percent. The 52-week high of the share was Rs 3688.60 and the 52-week low was Rs 1541.25.
The company's trailing 12-month (TTM) EPS was at Rs 102.82 per share as per the quarter ended September 2014. The stock's price-to-earnings (P/E) ratio was 35.52. The latest book value of the company is Rs 694.45 per share. At current value, the price-to-book value of the company is 5.26.
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