Maruti Suzuki's Q2 net profit down 39pc on weak demand

Weak demand environment dented automobile major Maruti Suzuki India's second quarter earnings, as the company reported a drop of 39.4 per cent in its net profit for the period.

Accordingly, the company's net profit for the quarter fell to Rs 1,358.6 crore compared to the same period previous year, largely  on account of lower sales volume, higher sales promotion expenses and higher depreciation expenses.

However, cost reduction efforts, higher fair value gains on invested surplus and reduction in corporate tax rate aided the company to off-set some of the impact.

Besides, the company's net sales declined by 25.2 per cent to Rs 16,120.4 crore from Rs 21,551.9 crore reported for the same period during the previous year.

"The results of the company for the quarter (July-September) and half year (April-September) FY 2019-20 have to be viewed in the context of exceptionally weak demand environment," the automobile major said in a statement.

"This year, the automobile industry has seen a significant decline in sales owing to several factors. One of the main factors is increase in the cost of acquisition of the car due to various reasons coming together like implementation of more stringent safety and emission (BS6) norms, increase in vehicle insurance expenses and hike in road taxes in many states."

According to the company, lower availability of finance and increased down payment requirement have affected the affordability of customers to own cars.

The company's off-take during the quarter under review has been lower by 30.2 per cent to 338,317 vehicles.