Hybrid Tax Exemption Bill In UP Could Drive Demand For Maruti: SMC

Maruti Suzuki India has announced its financial results for FY24, reflecting steady growth driven by strong CNG vehicle sales and expanding production capacity. At its global press conference announcing the financial results for Q1 2024-25, Suzuki Motor Corporation (SMC) said despite facing challenges related to global economic uncertainties and domestic market fluctuations, Maruti Suzuki managed to maintain a solid performance, with prospects bolstered by ongoing policy discussions and potential tax benefits for hybrid vehicles (HEVs).

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A key highlight of Maruti Suzuki’s FY24 performance has been the 34 per cent growth in CNG vehicle sales, a segment that has gained significant traction as consumers seek cost-effective and environmentally friendly alternatives to petrol-powered vehicles. The company has successfully addressed earlier supply chain constraints, particularly for popular models like the Ertiga, enabling a more consistent supply of CNG components. The Ertiga, which is manufactured at the Manesar plant, has benefited from the plant’s expanded capacity by 100,000 units since last year. With an annual production capacity of approximately 600,000 CNG vehicles, Maruti Suzuki is well-positioned to meet rising consumer demand.

CNG vehicles have reached a level of profitability that has allowed Maruti Suzuki to further expand its offerings in this segment. With CNG fuel costs significantly lower than petrol, consumer demand remains robust. Maruti Suzuki has strategically balanced its product mix between CNG and petrol vehicles to cater to diverse customer needs while ensuring profitability. The company’s ability to tap into this growing market has been a major contributor to its financial stability in FY24.

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In addition to market-driven growth, Maruti Suzuki’s prospects are being shaped by ongoing policy discussions at both the state and central levels. Recent news from Uttar Pradesh suggests the possibility of state tax benefits for hybrid electric vehicles (HEVs), a move that could significantly boost demand for such models if implemented. While this development is still in the proposal stage, it signals a growing policy focus on promoting more fuel-efficient and environmentally sustainable vehicles.

Maruti Suzuki has also been actively involved in promoting biogas as a clean energy alternative, with potential applications in CNG vehicles. The company views biogas as a key component of its long-term strategy for achieving carbon neutrality. Discussions with the government are ongoing, to expand biogas initiatives and integrate them into broader sustainability efforts.

While Maruti Suzuki remains optimistic about domestic demand, the company has expressed concerns over the potential impact of a global economic slowdown on India’s economy. The Indian government is expected to continue allocating public funds for infrastructure development, which could support economic growth and consumer spending. However, the risk of external economic pressures remains a key factor that could influence the company’s performance in the coming quarters.