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Maruti Suzuki India Ltd
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Ladies and gentlemen, good day, and welcome to the Q3 FY '22 Earnings Conference Call of Maruti Suzuki India Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Pranav Ambaprasad. Thank you, and over to you, sir.
Thank you, Margaret. Ladies and gentlemen, good afternoon, once again. May I introduce you to the management team from Maruti Suzuki. Today, we have with us our CFO, Mr. Ajay Seth; from marketing and sales, we have member Executive Board, Mr. R.S. Kalsi; Senior Executive Director, Marketing and Sales, Mr. Shashank Srivastava; from Corporate, Executive Director, Corporate Planning and Government [ Office ], Mr. Rahul Bharti; General Manager, Corporate Strategy and Investor Relations, Mr. Nikhil Vyas. From Finance, we have Executive Director, Mr. Pradeep Garg; Executive Adviser, Mr. D.D. Goyal; and Executive Vice President, Mr. Sanjay Mathur. The con call will begin with a brief statement on the performance and outlook of our business by Mr. Seth, after which we'll be happy to receive your questions. May I remind you of the safe harbor. We may be making some forward-looking statements that have to be understood in conjunction with the uncertainty and the risks that the company faces. I also like to inform you that the call is being recorded, and the transcript will be available at our website. I would now like to invite our CFO, Mr. Seth. Over to you, sir.
Thanks, Pranav. Good afternoon, ladies and gentlemen. I hope you and your families are healthy and safe. The third wave of COVID is posing challenges for the country at large. We are following all government protocols and taking all precautionary steps in the best interest of employees' health and safety, including that of our value chain partners. Let me start with some highlights of our product offerings and our company initiatives. We exported 205,450 vehicles in calendar year 2021. It is the highest-ever exports in any calendar year by the company. In the calendar year 2021, 8 of the 10 best-selling passenger vehicles were from Maruti Suzuki. We are deeply grateful to our customers for choosing Maruti Suzuki as their most preferred passenger vehicle brand. One of the notable aspects in quarter 3, was the launch of India's most fuel-efficient [indiscernible] car, all new Celerio. We are witnessing a good initial response. The new Celerio has a fuel efficiency of 26.6 kilometers per liter, and its variant has a mileage of 35.60 kilometer to a kilogram. [ Alti ] Suzuki Baleno is the fastest selling premium hatchback car to cross 1 million unit sales. [ Alti ] Suzuki Super Carry, the country's most powerful mini truck, has recently achieved the record milestone of 100,000 units of cumulative sales in just 5 years of its launch. Maruti Suzuki's state-of-the-art online car financing solution has received a phenomenal customer response. Maruti Suzuki Smart Finance platform has [indiscernible] cumulative INR 65,000 million auto loans to over 1 lakh customers within 9 months of its launch. Taking a step towards circular economy, Maruti Suzuki and Toyota [ Tsusho ] Group's vehicle scrapping and recycling unit commenced operations. The facility offers hassle-free end-to-end solution for customers to scrap vehicles in a [indiscernible] and environment-friendly way, with the capacity to scrap and recycle over 24,000 vehicles annually. Continuing on the path to promote the culture of safe and responsible driving in the country, institutional driver and traffic research was inaugurated in Chhattisgarh. This was the 8th IDTR in the country, managed under our CSR program.Coming to the business environment that prevailed during the third quarter, the company continued to experience a shortage of electronic components, especially during the quarter marked with festive period, when the demand for cars usually remains good. An estimated 90,000 vehicles could not be produced during the third quarter, owing to the global shortage of electronic components, mostly corresponding to the domestic models. Though still unpredictable, the electronic supply situation is improving gradually. The company hopes to increase production in Q4, though it would not reach full capacity. The inquiry bookings and retail sales in third quarter has shown an improvement, sequentially. Enablers such as finance, availability and interest rates, continue to remain favorable. On cost side, the commodity prices increased significantly over the course of last 1 year and has been the most adverse factor impacting the net profit. The company made maximum efforts to absorb input cost increases, offsetting them through cost reduction and pass on a minimal impact to customers by way of car price increase. Overall, during the third quarter, adverse commodity prices, lower volumes and lower non-operating income, compared to that of the same period, previous year, have adversely impacted the profit performance. Coming to financial results. Currently, the company sold a total of 430,668 units, lower than INR 495,897 units in the same period, previous year. In the domestic market, the sales stood at 365,673 units in the quarter against 467,367 units in quarter 3, last year. In the quarter, the company closed the highest-ever exports of 64,995 units, as compared to 28,528 units last year, the same quarter. This was also 66% higher than the previous peak exports in any quarter 3. During the quarter 3 financial year '21, '22, the company registered net sales of INR 221,876 million, compared to that of INR 222,367 million in the same period, previous year. The net profit in this quarter came down to INR 10,113 million, compared to INR 19,414 million in the same period, previous year. Comparing 9 months, the total vehicle sales during the 9-month period, were at 1,163,823 units. This includes domestic market sales of 993,901 units and exports of 169,922 units. The corresponding period previous year, the company has registered a sale of 965,626 units, comprising of 905,015 units in domestic market and 60,611 units in the export market. During this period of 9 months, the company logged a net sales value of INR 582,841 million, compared to INR 436,035 million in the same period, previous year. In this period, the company made a net profit of INR 19,274 million as against INR 30,636 million in the same period, previous year. We're now ready to take your questions, feedback and any other observations that you may have. Thank you.
[Operator Instructions] The first question is from the line of Pramod Kumar from UBS.
I have two questions. First is on the market share bit and second one is on Hybrid. So on market share, I just wanted to understand of -- does this still, kind of, use or hold that 50% market share special, which Suzuki had put out in the medium-term plan and even for 2030? So does the market share target still holds good for us, given the market share what we've seen in the last couple of years? So that was like the first question on the market share side.
Yes. I request Shashank to answer this. So he'll answer the question.
Pramod, so if you look at the figure of December, the market share for wholesale was 48.3%. And for retail, it was 49.9%, very close to the 50% mark. However, if you look at the cumulative figures, so far, for the year, the market share is just around 44%.So I think, judging by that, it does appear that if -- while December market share is close to 50%, but cumulatively, it might be difficult to reach that 50% at the end of the year, given the current production scenario. However, next year -- in the years forward, I think it's still quite feasible for us to target 50% market share. And that's what we plan to do.
And the reason I ask that, Shashank, is that we are still not [ participating ] in the -- the the smaller SUVs and the midsized SUVs and other categories. So -- and given that you are pretty confident that is quite feasible in the next [ series ], probably, when launch [ five ] time, you may not lag [indiscernible]. So with all the portfolio gap getting spent, is there a possibility that we could even reach that 50% mark in the ?
Over the last time, reset?
[indiscernible] the 50% market [indiscernible] going flat.
Yes, surely. So if you -- Pramod, if you look at our market share up till December, for half [ year ], it is 67%. If you look at the passenger cars, it is 62.5%. If we see the NPVs, where we have the XL6 and [indiscernible] competing against [indiscernible], et cetera, it is 64%. And for the Vans, it is 95.6%. So obviously, in all these segments, our market share being about 65% or thereabouts. It's the SUV space, which has pulled us down. And as you said, while the entry SUV, which is 50% of the SUV market, we have -- we are the market leader because we have the Brezza. And yes, we have a weakness in the mid-SUV segment, currently, and we hope to address it, going forward, by expanding our portfolio in this very critical category.
And Shashank, before I let you go, one follow-up. It's the general understanding that SUVs are inherently higher -- command higher margins than other categories, given the pricing differential versus equally [indiscernible] tax cuts. Is the industry notion generally right, in India as well?
Actually, there is -- I don't know the cost structure for other companies, but generally, that may not be true for any particular segment. It all depends on the competitive scenario and the pricing, which is what we see in the industry.
Fair enough, sir. And the second one is on Hybrid. Is there anything that you would like to share at this point of time, because given the plans what you have looked as a company -- have the organization, kind of, quite committed to that technology, despite lack of common fiscal support. So in that sense, I just want to understand, what is that -- the use case for the consumer, you see in the Hybrid, which is giving you that kind of confidence to, kind of, pursue that technology, while practically everyone else, outside of product [ Suzuki ], is [indiscernible] in a big way, even in the short to medium term. So if you can just help us understand the thinking and the rationale behind us, that will be very helpful.
So Rahul, would you like to take this?
Sure. See, while, one, we'll be focusing on all technologies, including EVs, including hybrids and others also that we have not discussed at the moment. However, given the high upfront cost of batteries, given the limited charging infrastructure network in the country, we do think that at least for the medium term, hybrids will be a very powerful solution. They are scalable. They do about 40% of the job of an EV, in terms of CO2 reduction, in terms of energy efficiency, but they are probably 100x scalable. So in the medium term, they will be a good option. And of course, EVs also have to be pursued for the long term. So all options have to be worked upon.
And also, any timeline as to when you debut the technology in the Indian market? I'm not looking for quarters [indiscernible].
Let's keep the excitement. Let's keep the excitement.
The next question is from the line of Amyn Pirani from JPMorgan.
My question was mostly on the raw materials side. This quarter, we have seen a sequential decline in raw material sales. And even on a raw material per vehicle basis, the costs have come down. Can you help us understand as to any particular commodity that has helped, or has there been a reset in the steel or aluminium contracts with the suppliers?
So there has been a marginal improvement in commodities, compared to the second quarter, especially the precious metals have seen a decline, compared to where they were in Q2. Although steel has shown some rise in Q3 as well, but we are now hopeful that, moving forward, we will see some correction in the steel prices, as well as the precious metals will remain at the levels where they are. So some impact of commodity reduction has come in quarter 3, and we expect some more to come in, in quarter 4, as the steel prices come down, which we have witnessed in the month of January. So that's the trend on commodities at this point in time.
And can you remind us as to how often do your steel contract is , is it like 6 months, because while the sale in December quarter, global steel prices are again up. So what's the lead and lag there, if you can help us understand?
We generally do it for half year. But sometimes, depending on the market volatility, we can do it for shorter periods as well.
Okay. Understood. And just one more thing on the currency. Can you just remind us what is your yen exposure? Because obviously, royalty is now fully in rupees. So what is the yen exposure, as we stand today?
Our direct yen exposure is now reduced to about JPY 30 billion, approximately JPY 30 billion.
Okay. Okay. And from the vendor side, like you used to mention as a percentage of revenues, what is the extent?
So there, we have an exposure of about JPY 50 billion, thereabouts.
Okay. So JPY 30 billion plus JPY 50 billion, direct [ 30% ].
That's right. This is only the yen exposure. There would be some exposure, which is also on the dollar imports and the euro imports, which is not counted in the yen exposure, but they would not be as large. The euro, for example, the euro exposure is about EUR 68 million, in our case, direct, and EUR 90 million, in case of vendors. And similarly, there will be some exposure on the dollar side also.
And that would be an offset on the exports, right? Exports is mostly dollars?
So now we have a significant natural hedge because exports have gone up quite a bit. So on the direct side, we have virtually -- we are surplus on dollars. However, if we include indirect, then, of course, we have a bit of a deficit dollars, because yen also has two legs, it's dollar yen and dollar rupee. So to that extent, we have a reasonably good hedging now, natural hedging now.
The next question is from the line of Kapil Singh from Nomura.
My first question is on demand, that if you can share the outlook for growth for FY '23. And I would also like some perspectives on the medium-term growth. I mean, beyond [ FY '11 ], whichever we slice or dice the data, industry hasn't really grown much because not even being a 5% CHR even -- whichever period we chose, if we take 2012 to '18 or thereabouts. So one of these base effects go through, let's say, next year, what is the kind of medium-term CAGR you are looking at? And why has it been below potential? Also, if you can add some perspective on the regulatory costs. We've also heard about [indiscernible] valves becoming mandatory as its [indiscernible] regulation. So that would be my first question.
Kapil, thank you for that question. The CAGR, as you said, has been declining, if you take the recent periods. You're right. But it's not as if you slice and dice it in any time period, it's 5% or less. For example, if we take the last 5 years, it's 6.2%. Last 10 years, 8.1%, last 17 years, 9.8%. So it is -- of course, it has come down in recent years. And I think, we discussed this in 2019, '20, when it had come down. The market had come down to about 18%. It was largely on account of the cost of acquisition, which was because of the conversion, which happened because of many factors, including the regulatory requirements of the BS IV to BS VI and safety requirements. So it is that, which had prevented the growth in '19, '20. However, if you look at the future, which is your -- the second part of your question, I think we can look at -- reasonably, look at CAGR growth in line with the economy, which would be roughly 7% to 8%.
Okay, sir. And sir, the second question was on the order book, you mentioned that it's around 40,000-plus kind of order book. And in October also, you had mentioned, it's more than 250,000. So could you give some perspective on whether the order inflows have been affected because of supply shortages also? Because there's no growth in order book, despite the production shortages that we have.
So actually, the pending or bookings is what is the figure you are quoting, 240,000 as of 1st of January and currently 264,000. Of course, the booking inflow has been reasonably steady. Month-on-month, if you see the booking inflow, pretty steady, I would say. For Maruti Suzuki, I can give the rough -- roughly figures of around -- maybe about 6,000 on an average per day, a little bit less in January, so far. But the buildup of pending payment happens because you don't have enough vehicles to retail. That's what we are witnessing. But if you want a question of whether -- if you want an answer to whether there has been a sharp fall in the booking inflow, the answer is no, there has been no sharp fall in booking inflow.
The next question is from the line of Gunjan Prithyani from Bank of America.
The first question is on the news flow around this airbag regulation. And also, we do have the next set of CAFE norms. So could you just help us understand how much will this translate, in terms of cost, and where -- at what stage, this regulation is?
Well, the CAFE norms, I hope that we are aware that Maruti is in the best position, in terms of CO2 footprint, whether on an absolute scale or a relative scale. And so we are already meeting the norm, which is supposed to come from April. The second is on the airbag issue, we are in discussions with the Ministry of Road Transport on [indiscernible]. It's not just the cost, it's the feasibility also. And once we have a discussion, we'll be in a better position to share the results.
Okay. Got it. The other question I had was on the supply side. Now, just trying to understand how much improvement do we expect from where we were in the month of December. And also, you mentioned in the release that we'll not reach our full capacity in Q4 as well. So I just wanted to clarify, when you look at this full capacity, do you include the 93 of Gujarat because December...?
So our full capacity is approximately 5.4 lakhs -- 5.5 lakhs per quarter or about 22 lakhs per annum. And while there is a steady improvement in the supply situation, we still may not be able to reach full capacity because of electronic components. And of course, the general disclaimer holds true, it's always unpredictable, so we never know what the price may happen in this area. It's a global problem.
Okay. But the December run rate, you seem to be sustaining still, there hasn't been any deterioration to that, right?
We are better in Q4 than we were in Q3.
Okay. And lastly, if you could just share the royalty discount and retail volume numbers for this quarter?
Royalty?
Royalty in this quarter was at 3.6%, and the discounts were at 15,200 in this quarter. And what was the other information you wanted [indiscernible]?
The retail during this quarter.
I guess, numbers you would have.
The retail for Maruti Suzuki for this quarter, if she was, right? Q3 retail was 392,171 passenger [ per retail], plus, if we include Carry, then it is 403,970.
The next question is from the line of Raghunandhan N.L. from Emkay Global.
My first question. On CNG vehicles, can you share the volume number and market share for Q3? And can you talk about future potential for CNG penetration, as increasing share of CNG and product mix should be market share accretive for the company?
Yes. So CNG volumes for April, December period, so far, are just around 150,000. We hope to close the financial year at around [ 237,000 ], [ 235,000 ] range. Last year, the similar figure was 160,000. And the previous year, it was 106,000. The penetration of CNG for Maruti Suzuki, is now close to -- slightly above 15%. And for the models in which CNG is there, remember, we have 8 models, which are in CNG, it is around 30%. Going forward, we do expect CNG to have continued to find traction. And for the next year also, we have -- we think, there is going to be a good growth in CNG, judging by the order inflow, the pending bookings and also the fact that the CNG network is expanding rapidly across the country, and the fuel prices at the pumps continue to be high for gasoline and diesel.
That's very encouraging. My second question, company is targeting to fill white spaces ahead, and some of the new products would be in collaboration with Toyota. In a scenario, where the product has jointly developed, will both OEMs launch the product at the same time? Or would Maruti get the opportunity to launch the product first? I was trying to understand, whether bulk of the new model volume go towards the OEM, who launches the product first?
So this is a little conscious, well-thought-out strategy, where we look at our commercial benefits and the opportunity of sales in the market, and then we time it accordingly. So we'll get immense benefit from this alliance and the timing and the strategy, thereof.
Got it, sir. Lastly, can you share the CapEx spend, on a YTD basis, and full-year plan for FY '22? And would it be possible to share the plan for FY '23 as well?
CapEx, for the YTD [indiscernible]. So we have spent, so far, INR 2,233 crores that we spent till December. And the plan for the full year is -- a little upwards of INR 5,500 crores. And then we are on target, in terms of the plan for the year. So there is an estimated expenditure of about INR 3,000 crores, which will be incurred in the next 3 months.
Understood. And broadly, can you indicate the breakup, sir? That's all from my side.
So this is divided -- I don't have the exact breakup with me, but this is divided between the new models, R&D expenditure, facilities in the existing capacities that we have and also the additional land purchase, et cetera, that we will do as part of our capital expenditure.
The next question is from the line of Pramod Amthe from Incred Capital.
This is with regard to new product launches. It seems because of the semiconductor challenges, some of them got delayed to come through for FY '22 pipeline. In that context, how are you looking at your planned launches for the remaining products? Do you still maintain the timeline on the yearly launches? Or are you deferring the medium-term launch plans, considering that you need to maintain some gap and momentum to be built up on new launches?
So the -- it's not probably correct to say that the launch plan itself has been affected by the semiconductor shortage. It is, generally, not true. And we do not foresee that going forward, we will change our launch plan, based on the semiconductor issue.
Sure. Second one is with regard to exports. Considering that this year, we are seeing a sharp jump. I wanted to know, what is your medium-term plan, in terms of taking this exports as a proportion of these sales? And I also wanted to get your thoughts, in terms of you have also applied for Auto PLI. How does that fit in the overall scheme of things?
Okay. So we were able to clock the highest [ single ] exports in this calendar year. And the good part is that from a demand perspective, it seems sustainable. So we've gone into expansion of products, expansion of the network, expansion of the number of markets, where we are present, and all have helped. It seems sustainable in the medium term, so far, barring any surprises that may come about. And the second question was on PLI. So companies have applied for the PLI. And of course, [indiscernible] is in the details, so there are lots of conditions, a lot of thresholds and other parameters that will determine the total incentives to each company, across each product. So the good part is that many companies have applied. And to that extent, there will be increased localization and increased production in those technologies, the list of AAT, Advanced Automotive Technologies.
And specific to you, yours is more focused on exports for PLI application or more about the -- because [ operation ] will come through for venture, right? .
The earlier format of the PLI scheme seem to be towards encouraging exports. But now, the latest version, in which form it came, was about import substitution or localization. So it's about localization. I think, neutral across exports and domestic sales.
The next question is from the line of Aditya Makharia from HDFC.
Yes, sir. Just on the follow-on question with Toyota joint development. So there's a lot of news about FY '23 being a big year for Maruti because you will launch 2 to 3 SUVs. Now, I know, directionally, you will not comment on exact models, but can we expect something quite sizable coming into next year?
So as I explained, yes, we have a plan to further strengthen our portfolio in different segments, including the ones where we are currently weaken. So we can expect a good strengthening of the portfolio in the coming year.
Okay. That's very encouraging to hear, sir. And just a second question is, you did mention that the chip shortage is now gradually easing. So is it totally gone now? And are we going to be working at that 2.2 million annualized , if demand is there?
Yes. So if you see the chip shortage, everything, and I think Rahul explained a little bit, we have been experiencing a gradual improvement in the supply position. And one small correction, it is not with respect to the capacity that we speak of, it with respect to the plan that we have and the production plan, which we have. So in September, we were just around 40% of our plan. In October, we [ test ] around 60%. In November, we were around 83%, 85%. In December, we were just around 90%. So the situation, in that sense, is improving. However, it is still not 100%, as you can see. And we are hopeful, in that in January, Feb and March, we will continue to see this improvement, hopefully, to be above that 90% mark. But as we have mentioned in our press release, we may not reach 100%. When we will reach 100%, is actually not clear at the moment because we cannot take a definitive view on that, because it's a very complex supply chain, which is involved, involving not just Maruti Suzuki, but all OEMs in India and not just India but across the globe.
Sure. And sir, just the last question on market share because you had lost market share in the first 6 months due to chip shortage. Now, we see Hyundai is really on the back foot, on that count. So will that also enable us now to catch up on where we actually should be at the 50% mark?
So yes, I did mention, if you look at the segment-wise market share. I gave you -- I gave the figures for passenger cars, is at 63%, for Vans, it is 96%, for NPV, it is 64%. And without the SUVs, we are around 65% of the market share. So I don't know whether the chip shortage for other people is going to help us or not. We, obviously, are looking at our performance. And hopefully, like in December, our retail market share was close to 50%. We would try to maintain that mark, going forward.
Sure. Congratulations for a good result and a very positive commentary. Thank you.
The next question is from the line of Jinesh Gandhi from Motilal Oswal Financial Services.
First question is on the data on exports, and what was the Gujarat [ production ] ?
So exploring the INR [ 3,243 ] crores realization. Okay. And Gujarat production in the quarter was approximately 142,500, approximately, number of [indiscernible].
Great. Second question pertains to the depreciation in this quarter, it seems to have come off quite a bit. Is there any one-off in this? Or this is the new level of depreciation because our capacity addition has been done at Gujarat plant?
So the depreciation that you see, is related to [ MSIL ] depreciation. And the other line item of SMG comes under the lease expenses separately. To the extent, the assets have already lived their life, the depreciation of those assets would finish in that period. So it is related. So if you look at both SMG's depreciation and our depreciation together, it is almost similar as it was last year, about the same number that you see, INR 1,060 crores in Q3 last year and INR 1,064 crores now. Not different. And even as a percentage of sales, it is at 4.8% in both these quarters.
Great. So understand that depreciation will be around this quarterly run rate of 6,000 -- or INR 640 crores, INR 650 crores, in that range, as against INR 750 crore in second quarter?
Yes, that's correct.
Great. Great. And third question pertains to -- with respect to other income. So we have seen consistent drop in other income because of increase in [indiscernible]. What should be the sustainable line of other income [indiscernible] rate of at around 6.8%, 6.6%. Should we go back to INR 500 crores, INR 550 crores a quarter, or it should be lower than this?
See, we have done two things to derisk. One is that we have shortened our tenures earlier. We used to be between 2 to 3 years of papers. Now we are down to 1-year paper, so that the risk of is minimized, given the fact that interest rates are rising. So we are on a shorter tenure. And last year, we had significant mark-to-market gains because the interest rates were going down and therefore -- and we were on 2- to 3-year papers, and therefore, the gains were significant. This year, we have, on the contrary, small mark-to-market losses. Average returns, on a 1-year yield, is now between 4.5% to 5%, depending on where the markets are. So effectively, all these are cash surplus that we carry, you should see an income of anywhere between INR 450 or thereabouts, every quarter.
Okay. Got it. That's quite helpful. And lastly, for any FOREX gains in royalty or RM cost in this quarter?
Not much movement in foreign exchange. There is a slight -- if we compare the two quarters, there's an improvement in this quarter by about INR 50 crores on the direct imports. So that's reflected in the material cost. Other than that, there is no significant change in foreign exchange.
The next question is from the line of Kumar Rakesh from BNP Paribas. Please go ahead.
My first question is on the commodity inflation side. So how much of it is still under recovered [indiscernible]? And in a scenario that commodity prices remained flat in quarters ahead, will you be passing this on, gradually, to customers?
So we have been -- we have been taking a series of actions, internally, with respect to the unprecedented commodity increase. We have worked very hard to reduce our cost. We have also been working hard to reduce -- reduce the cost [ restructuring ] exercises on the material side, [ vigorously ]. There have been price increases that we have taken, over the last one year, to offset the price increase, although it's always a painful decision to take frequent price increases, given the -- the cost of ownership continues to go up. And as Shashank mentioned that one of the reasons of the drop in industry in '19, '20, was the cost of ownership going up. So -- but we have taken price-increase actions. And the last one we took was in January, where we have increased our prices. The impact of that will be visible to you in the fourth quarter. Discounts, fortunately, in this quarter, this has been happening much lower, compared to last year. Also, because of the shortage of cars in the -- with the OEMs. So I think, all these factors will play out, in terms of how the commodity price will be mitigated.
How much was the under recovery on the commodity side?
Commodities have gone up on a sequential -- last year, average basis, by about 10%, right? And we -- and we have done quite a bit of price correction.[Technical Difficulty]So we've done quite a bit of price correction. There have been lower discounts in this quarter. And the impact of that is seen in this quarter, as the margins -- operating margins have gone up. But you will -- the balance impact you will see in the next quarter.
Got it. My next question was about the market share. A lot of discussion has happened on this call as well and outside as well. And Mr. Srivastava also said that white spaces is one of the areas in which we can potentially work, especially in the SUV space, to get back the market share, the overall market share. So why don't we disclose the model launch plan? And not specifically models, but at least quantify that, the number of officials or new launches, which we are planning to do this year or for a longer duration of time, say, 5 years, like many of our competitors, locally and globally, also does this. So can we get some indication about the model launch plan, not by disclosing any specific model per se?
So I have mentioned that we have always had a very strong product plan and a portfolio of [indiscernible]. And we will continue to do that. And I indicated the areas. The reason why we don't mention it specifically, is because we operate in all segments. It doesn't help by letting the market or anybody know which segments we are appearing in each models. There are -- for example, if you have a full model change in a particular model, you would expect that the current sales also to be affected. It doesn't help, actually. And that's the reason why, as a policy, we do not disclose the models that we'll be launching in the future. We don't make any specific reference to new models.
Got it. I was referring to just quantify the number of models you plan to launch, without disclosing which specifically...
So there, there is this question, which will always be there because new models means what? There are new brands for which you have an absolutely no background or no past history. Or you could have a full model change, which we call FMC, or you could have a minor model changes, which you call MMC.So these two consider, where it is actually -- maybe, if you give information, it might be misunderstood and actually, the market may be misguided rather than being guided.
Fair enough. One final question on the CapEx side. So this year's CapEx is at a higher level, compared to our recent trend, partly because we are going to make land purchases this year. So is that trend likely to continue in FY '23 as well? Or this land purchase-related additional CapEx was one-off for this year?
So we are now working on our plans for the next financial year. So this is the excesses of preparing budgets and -- and then -- depending on the requirement in the plants between the Manesar and Gurgaon and the new model launches, we'll decide, and then we'll communicate to you, in terms of what the next year plans are.
The next question is from the line of Joseph George from IIFL.
So if you look at the commentary, I mean, a lot of companies such as two-wheeler companies or tractors or recently FMCG companies, there's a buzz that there is a lot of weakness in the rural markets, and we are seeing that in sales, impact at the sales, et cetera, et cetera. So what are the [ things ] that you are seeing in the rural market and to pay rural has go faster for you, compared to urban? But if you can update us on trends there, especially in the context of what other companies are saying.
So in our case, the rural markets still continue to have a strong run. And if you see that the percentage of sales of -- in the rural areas, has actually gone up a little bit in this year. So from around 41.5, it has gone up to almost -- I mean, just short of 43. So it does indicate the rural markets are still robust and going strong. And I think, there are reasons for it also, which we have been stating. The Kharif crop has been record, we have had good monsoons, back-to-back. The Rabi sowing this year, so far, has been very good. The MSPs have actually gone up. So we consider that as a good sign for rural growth to continue. And by the way, tractor industry also, if you look at the calendar year, it has actually grown on the back of some record growth, last year. Last year, growth was 27%. Until December, the growth for tractor even, is around 1%. We expect that the rural to continue to show strength.
The next question is from the line of Ronak Sarda from Systematix.
Just a clarification first, what was the average price hike, which we took in January?
The weighted average is close to 2%.
Okay. The other question is for you, Shashank. So while there is the gas in the portfolio in the SUV space, but how do you balance the equation between the volume market share and profitability? Because as you mentioned, as you go to at least smaller, other compact SUV, the [indiscernible] intensity is higher. And in a way, we kind of -- the customer segment is someone, who is buying a compact car or a better-premium hatchback, whereas Maruti is already a market leader with almost 65% market share.So how do we balance this -- the entire equation of market share versus profitability? And what are your thoughts on the new product [indiscernible]?
I'm not fully -- I don't think I understood the question fully. Probably, what you are trying to say that the profitability on the SUV sector -- segment is higher. Is that what you are saying?
No. While there is a gap, when we talk about medium or large SUV. But when we talk about the compact SUV, let's say, in and around the Vitara Brezza range, we are in a way, targeting the customers, who are buying a compact or a hatchback.So how do we see the overall equation? How do you balance the question between market share and profitability? Because that segment is highly competitive. And as you mentioned in a question earlier, the profitability will depend on a lot of different factors. And SUVs are not inherently profitable. So how do we balance out the equation? And what are your thoughts on the new launches in that category?
So I think, individually, we have to look at model by model. And what I had referred earlier to some question, which was raised, the profitability, obviously, depends on the segment you are operating in the competitiveness of the segment, the number of models in that segment, our own cost structure and the cost structure in the industry. So it's a mix, which not necessarily you can actually differentiate, based on an entry SUV or a premium hatch or a new hatch, et cetera. By the way, the most competitive also, in terms of the number of models, is the SUV segment. There are about 45 models, which are complete in the SUV space, as against hatches, there are only 19. So obviously, there are pluses and minuses, and we have to look at model-wise rather than looking at some overall profitability segment by segment.
Sure. Sure. And a final clarification. When we say, the order book was around 250,000 units, how much of this would we be seeing?
So at the current, 264,000, which is the total bookings, CNG is [ 106,117 ].
[indiscernible].
117.
And may I just explain what Shashank just mentioned about profitability and market share. What we're essentially saying is, there is -- we don't accept the trade-off so easily and so early. I think the best thing that pushes the trade off far away, is excellent products.So if you have excellent products, you will not face -- face a situation, where you have to choose the lesser of two evils, either volume loss or profitability loss. I'll give you an example, the Celerio, it has a fuel efficiency of 26.68. It's much higher than its nearest competitor. The CNG version has a fuel efficiency of 35.6 kilometers per kg. Fuel efficiencies in the zone of 30s, is unheard of in India. It's only Maruti, who's present in the 30-plus kilometer per kg club. Similarly, a higher network, if you -- if we have a higher volume, we can sell more numbers of the same model, as compared to our competition. So these are the methods by which we push this tradeoff away. We don't accept that there is a tradeoff so is it -- between profitability and market share.
The next question is from the line of Nitij Mangal from Jefferies.
I want to ask you, what are the plans for the capacity expansion at Gujarat and -- I mean, what will make you comfortable or confident to go for the next ?
So in Gujarat, the third line is already operational, and it is -- we have the option of 2 shifts also. So with that, our total capacity is 2.2 million per annum, and a little bit of productivity stretch is always possible.
Right. But I just think in -- so let's say, to start the next line today, it will probably take another 2, 2.5 years. So I mean, let's say, in the next whatever few years, when you out to start that expansion?
So this is where our productivity stretch helps, always. And in the past also, when our marketing has required production, it has always come up to -- has risen to the occasion, and they have been able to deliver. And this stretch also improves our operational leverage and our profitability. So we keep doing that all the time, across cycles.
Okay. And my second question is on exports. We have seen a very good increase in volumes over there. Last time also, you mentioned that it is something, which should be sustainable. You talked about Toyota network, et cetera. But let's say, if you think of exports, 2, 3 years out from here, what is the potential in those markets?
So as of now, whatever steps we have taken -- I mentioned about a 3-pronged strategy, more number of products, more markets and more density of the network within those markets, so they have generated good dividends. And it is sustainable in the -- at least in the medium term. And we have to keep in mind that global markets do have a sense of unpredictability and surprises. Sometimes some country develops some protectionist measure, some economy goes up or comes down. So we will go along the [ wind ], and we'll keep -- we would like to keep increasing our exports.
The next question is from the line of Ashish Jain from Macquarie.
Sir, my first question is on market share. Now, if you look at the SUV segment in particular, nearly 35%, 40% of volumes, at an industry level, is actually diesel. And in that backdrop, how do we see our market share in SUV, even with the new launches? Is CNG a viable option within the SUV space at all? Or you think, [ CNG ] will not work in SUV?
Yes. So as I explained, Maruti's market share, if you -- I mean, without the SUV, it's 65%. So obviously, that is an area of interest for us, if we have to maintain an overall market share, 50% or thereabout. Talking about the diesel penetration, the diesel penetration, currently, in the industry is around 18%. But if you look at segment-wise, it's quite different. And you're right, passenger cars are just around 2%, and Vans, around 4%. If you see the SUV space, there, the entry-level SUV is only about 20%. It is actually in the mid-SUV that you see some traction in diesel, around 58% or thereabouts. But remember, before the Brezza came with that K-15 petrol engine, the diesel share of even entry SUV was about 88%, 89%, just a couple of years back. So in a couple of years, 88% diesel actually became just around 20% in the entry SUV. And we would expect that going forward, if you have some really good products in the mid-SUV, which are petrol, then also, you could expect the [ sharp ] fall in the diesel percentage, in the mid-SUV space as well.Overall, SUV -- in the SUV space, the diesel share is roughly about 37%, which used to be about 95%, just a few years ago. And by a few years, I mean about 3, 4 years back. So it has rapidly come down from about 95% to 37%, and even more rapidly in the entry SUV segment. So if you see some play in the mid-SUV segment for a good petrol SUV, then you might find the same story being repeated there as well.
CNG is an option in SUV?
It is always an option, of course, CNG is an option in SUV as well.
Sir, my second question is on the airbags and all. Can you give a sense of what will be the cost implications and all, if the regulation goes through in the current form?
So as of now, we are not getting too much into the cost. There's an implication of semiconductors. There is an implication of lead time or delivery. So it is a comprehensive topic in itself. We are in discussion with MRTH. And I think, at an appropriate time, we will share the findings.
Thank you. Ladies and gentlemen, due to time constraints, that was the last question for today. On behalf of Maruti Suzuki India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Thank you.