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; Executive Director, Marketing and Sales, Mr. Shashank Srivastava; from Corporate, we have Executive Director, Mr. Hideki Taguchi ; and Executive Vice President, Corporate and Government Affairs, Mr. Rahul Bharti. From Finance, we have Executive Director, Mr. DD Goyal; Executive Vice President, Mr. Pradeep Garg; and Vice President, Mr. Sanjay Mathur. The call will begin with a brief statement on the performance and the outlook of our business, Mr. Seth, after which we will be happy to receive your questions. May I remind you of the CFO, sir? We may be making some forward-looking statements that have to be understood in conjunction with the uncertainty and the risk 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.
Thank you, Nikhil. Good afternoon to everyone. Hope all of you and your families are keeping in good health. Owing to an unprecedented global pandemic of COVID-19, it was a unique quarter in the company's history, wherein a large part of the quarter had zero production and zero sales in compliance with the lockdown stipulated by the government. Production and sales started in a very small way in the month of May. The company accords utmost priority to the health, safety, and well-being of all employees and associates across the value chain, and particularly its customers. The company has implemented stringent controls, which are over and above the government's stipulated guidelines to prevent the spread of COVID-19.
Besides, continuous education is being imparted to the workforce to observe a high degree of self-discipline, and regularly being reminded of not letting the guards down at any moment, whether at office or outside. The company has adopted work-from-home practice wherever possible. Taking these measures as base, further measures specific to vendors and dealers have been identified and implemented at their facilities to safeguard the employees. For ensuring the safety of customers inside the showroom, the entire customer journey has been redesigned to ensure minimal physical touchpoints and maximizing the use of digital interfaces to ensure contactless operations. The company is extensively using its flagship services on wheels, a program to provide vehicle repair services at customers' doorsteps. Sudden halt of business with start of lockdown put significant pressure on cash flow of some business partners like suppliers and dealers.
The company provided them with cash flow support to ensure that they are able to pay salaries to their employees and meet their obligations. The company is also facilitating the suppliers to get access to attractive financing schemes for managing working capital. After the lifting of lockdown, fortunately, we saw some demand recovery. Accordingly, the company focused on clearing the stocks at the dealership and maximized the retail sales. The company has forged tie-ups with banks and launched innovative retail financing schemes. However, the biggest challenge is to ramp up production of vehicles amid shortage of manpower and local lockdowns being observed in states or cities, affecting the supply of components and delivery of vehicles at dealerships. It is too early to judge whether demand has only pent up or it has really started to recover.
Investors can also feel proud that your company was able to help in mask production of ventilators, PPE, and masks to the expectation of the government of India, despite zero prior experience. Coming to the highlights of Quarter One for the financial year 2021, the financial results of the quarter are not comparable with that of the same period previously, and should therefore be seen in the context of the ongoing COVID-19 pandemic lockdowns and restrictions required by the government for safety. The company sold a total of 76,599 vehicles during the quarter. Sales in the domestic market stood at 67,027 units, and exports were at 9,572 units. During the quarter, the company registered net sales of INR 36,775 million. The company made a net loss of INR 2,494 million in the quarter. It was partially offset by lower operating expenses and higher fair value gain on the invested surplus.
We are now ready to take your questions, feedback, and any other observations that you may have. Thank you.
Thank you very much, ladies and gentlemen. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press * and 1 on the touchscreen telephone. If you wish to remove yourself from the question queue, you may press * and 2. Participants are requested to choose answer while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have the first question from the line of Kapil Singh from Nomura. Please go ahead. Mr. Kapil Singh from Nomura, you may please go ahead with your question, sir.
Yeah. Can you hear me?
Yes, sir.
Okay. Thanks, sir. Firstly, sir, I wanted your views on demand outlook. You could cover whether what kind of inquiry levels are we seeing currently, and how are the next few months looking like. I know you mentioned that we can't say whether current demand is pent up or not, but if you've done any analysis on that, that would also be helpful.
I would request Shashank Sir to answer this, so please go ahead, Shashank Sir.
Yeah. Thank you for the question. If we see the parameters of consumer demand as reflected in inquiries and bookings and retail, I would say it's around 85%-90% of the pre-COVID time. That is as far as the consumer demand is concerned as of today, in the first three months that we have operated in this year. As regards the future, I think that's a much more difficult question, and it will obviously be a steady state. Long-term demand depends on the fundamentals of the economy because the automobile sale is related to income levels. Also, it's related to the sentiments because it's a discretionary purchase. I think going forward, much will depend on how the COVID situation evolves. If we had, as I keep saying, that you could see a vaccine upside or you could see a virus downside.
We are keeping our fingers crossed about which way the COVID thing will move, and I think it's so difficult therefore to make a clear guideline or clear prediction of what the demand is going to be. However, having said that, the bounce back, as reflected in the consumer parameters I just mentioned, has been encouraging, and we are looking forward with a lot of optimism. Thank you.
That's good to hear, sir. Secondly, just on financials, to Mr. Seth, just one question. I know this quarter is not really comparable, but still, I mean, because we have to look at what we can see in terms of numbers. If I look at raw material per vehicle, it's seen a sharp increase. It's up to INR 300,000 compared to INR 330,000 in the previous quarter. Could you give some color here? What are the factors that have led to this? On a normalized basis, has there been any cost increase, or is it more or less at the same level as previous quarter?
Raw material to net sales, in the normal course, would be about the same level. I think this quarter was an exception for a couple of reasons. One is that the inventory levels went down significantly, whatever the stocks that we had from March to now, and therefore there was a fixed cost incidence that we take once in a while. This will get normalized because I think over INR 110 crore. That in a small place of sales value translates to over 3.5%. That was one reason. Second is that if you look at the discounts, discounts typically are amortized over the wholesale numbers. Wholesale numbers are much lower than the retail numbers, and therefore discounts on the face of wholesale numbers look much bigger.
Discounts on an average this quarter were about INR 25,000, shared over INR 25,000, whereas if you were to convert that into retail numbers, they would have been much below INR 20,000. I think that was the other operation we had. If we take away these two exceptions, then material cost to net sales ratio is pretty much the same as it was sequentially quarter four to quarter one.
Okay. Thank you so much.
Thank you. Next question is from the line of Yogesh Aggarwal from HSBC. Please go ahead.
Yeah. Hi, sir. Just a couple of questions. Shashank San, you just mentioned the bookings are back to 85-90%, and we know parts of India are still locked down, and there is a financing issue as well. Like-to-like in areas where there is no lockdown and financing is easier in certain categories, is the demand better off than last year in that sense?
Yeah. Even in June, if you see, there were some states where actually there was a positive retail over the previous year. You are right. It is varying hugely across the states. The states which seem to have been affected currently most in the negative sense are Kerala, Maharashtra, and Tamil Nadu.
Right. Okay. Related to that, as you said, pent-up demand is not as tough to guess, but we are also seeing a very tight secondhand car market. Does that mean that a large part of it is first-time buyers today, which means they are incremental? When the market softens to secondhand market, then obviously the replacement demand will come back as well. It will all add up in the coming months, hopefully.
Yeah. You have to distinguish between two ties. One is the pre-owned car market and the replacement buying. Because the replacement buying affects the supply of pre-owned cars, whereas on the demand side, there is a clear reflection that the demand for pre-owned cars has increased. The supply side, of course, is the issue at this time. The problem is not selling. It is about buying. Replacement buying is coming down because we believe consumers will hold on to their vehicles a little longer than what they have been in the past before they upgrade to a bigger or a better vehicle. I think you will see both, a demand going up for pre-owned cars, at the same time replacement buying coming down. That is what we see right now in the current demand scenario.
As far as your question about the first-time buyers is concerned, yes, because the replacement buying will come down, there will be an increase, of course, in some additional car buying. We do expect that the reasons for buying the car purchase, which is functionality, would probably take precedence, and that reflects in the increased first-time buyers. It is sort of reflected in the current data of the last three months that we have.
Okay.
Thank you.
Just to quickly on Toyota relationship, can you provide some update in terms of both exports potential and then in India in terms of model transitions? Thank you.
Rahul, would you like to take this up?
On exports, fortunately, a lot of countries are coming out of their lockdowns, and we are looking at this market also aggressively. The government is also ambitious about exports, and at least in the medium term, we are quite ambitious about our exports. Your other question I missed?
In India, in terms of model transition, keeping with Toyota?
Whenever we have any such new model plan, we will disclose it at the right time. At any point of time, we always have new models in the pipeline. What I can also mention to you is that in exports, the tie-up with Toyota will help because we'll get much deeper market access, particularly in Africa.
Right. Okay. Thank you. Thank you also.
Thank you. We take the next question from the line of Pramod Kumar from Goldman Sachs. Please go ahead.
Yeah. Thanks, Rahul. My first question pertains to the downtrading trend in the market. There has been a strong belief that this crisis will result in a lot of customers relooking at their purchase decision and buying cheaper cars instead of what they wanted to buy. Based on the data you have for the last few months, what are the broad trends emerging? Are we seeing more demand for our alternative partner, or are we seeing a massive variance level shifting just from a ZXI to a LXI or a VXI or something other? If you can share something with us.
Yes. You are right. The current data in terms of the inquiry levels does indicate that there is an uptake in the demand towards the smaller cars. That's, I think, also intuitive and has been also sort of reflected in our consumer research. Having said that, we have to see the steady state, what would be the demand patterns likely to be? Because it's also true that in the past, we have seen when consumers revert to the original state, the trend in the last few years has been towards the SUV type of vehicles. I'll say both. At this moment, the data does suggest that in terms of inquiries, the percentage of inquiries for the hatches, which is the small car, seem to be higher than the previous years. Just for information, it's around 65% as against 55-56%, which we traditionally had in the past.
As regards to.
Shashank, , how much of this would be because the larger parts and city markets are virtually shut or they're not kind of operating at the optimum level because people are working from home? How much of this is because of that element? Would you see this ratio reverting to the normal level once these cities or the other cities are shut?
Yeah. I think it's a wider question because part of the reason for the telescoping of demand downward is not necessarily the lockdowns or the thing, but also probably because the income level expectation for the future seems to be a little lower for the consumers, whether it is in terms of their businesses or in terms of their salaries or in terms of employment, etc. As far as the number of outlets are concerned, we have the number of outlets which keep opening and closing are pretty much changing every day because of the local lockdowns being enforced by various state governments in different districts. At one point of time, we had almost 91-92% of our outlets, which are about 3,080 outlets. Of those, 91-92% were open, but it keeps varying.
In fact, on weekends, there are some 10 states who have imposed weekend lockdowns. The number varies. I think if you are looking for a percentage of showrooms which are open, it is varying between 81%-82% to 91%.
Thanks. The second question is for Ajay Seth. Ajay Seth, as the old adage goes, there's never a very good crisis, and we are clearly in the middle of a crisis. Given this, what is the market management doing in terms of any big initiatives to lower its fixed cost intensity? Because if you look at the P&L of markets for the last five, six, seven years, we've seen massive change in some of the cost centers like marketing and advertisement and some of the other things which have become fairly fixed. The outbound there, when you go from five, six, seven years, which has increased the break-even levels, it's too big. Are we doing something which is structural which could reduce the fixed cost intensity in the business?
We are working on two parts. One is that we are definitely working very hard on the fixed cost. You've seen that this quarter, we have worked hard in terms of reducing costs. Most of them are discretionary, which we have deliberately reduced, and others are various areas where we have worked very closely to see how we can bring the cost down. The focus is to bring the fixed cost down throughout the year. There are targets that we have for all the verticals. We are doing that in a very harmonized manner with all the concerned verticals. That's one part. On the other side, we are also working on the material cost side where we are looking at localization very more rapidly, localizing the imported components.
Second is, how do we further bring the model costs lower by having focus on the model cost down reduction programs that we run? I think these are two areas where we are working in a very focused manner. We do recognize and realize that in a crisis or a situation, we need to be very alert and be very careful about both variable as well as fixed cost.
Finally, on the strength of the dealer viability as a dealership context, it's one of the best in the industry so far. Looking beyond the P&L of the company, if you can shed some color on the financial position of the dealers and suppliers in the current environment, and what is Maruti doing to support them in this particular tough time? Related to that, would you or Shashank expect a reasonable turn or shutdown of the competition dealerships, especially the smaller brands, because of what the dealerships are going through? Probably at the industry level, if you can provide color on that.
We are keeping a very close watch on all our dealerships ever since the pandemic happened and even before that. We have a concept of a balanced scorecard of a dealer where we keep monitoring his performance on all parameters, including his financials. In fact, we have also provided help to dealers during this pandemic by releasing their advances much earlier and ensuring that they have adequate funds. We've also given them interest subsidies where they require. Further, we are working with banks to ensure that there is no stoppage of their facilities, both working capital as well as the inventory financing. On the retail side, I think Shashank already mentioned that we're working with the banks under various schemes. I think on the dealer side, we are at the moment pretty much okay.
There will be, of course, some few dealers who will have problems, which I will ask Shashank Srivastava to mention. Overall, the dealers' revenue is largely through the workshop where the load now is coming back. I think the revenue that they earn from there is pretty sizable because they are all large dealers and they have a reasonable share of business. We do not see such a problem with our dealers compared to what it could be otherwise with other players of competition because we are talking of large revenue coming not from the sale of cars, but from the workshop and other parts of business that they do, which is True Value or insurance and financing, etc. I will ask Shashank Srivastava to supplement what I have just said.
Yeah. I think I will add on to what Ajay Seth said. We have a very robust model for profitability for the dealer. That is also reflected in the fact that if you see the last three years, there have, according to the FADA, been about 370 dealers who have closed, out of which Maruti had, I think, 14. That is a very good sign as far as profitability of Maruti Suzuki dealers is concerned. We have a very robust system where it is not the sales revenue alone, but we have nine revenue streams, some of which have been mentioned by Ajay Seth, including the workshop, the body shop, the insurance, the finance, the extended warranty, the accessories business, and so on and so forth.
As far as the support to the dealers in this thing, you are right, there would be stress, especially cash flows, especially when there was no retail in April and half of May. We have made sure Ajay Seth mentioned about the transfer of funds like accumulated reserve funds, etc., scheme payouts. Also, we have given some inventory support both for these vehicles as well as for accessories and also for True Value cars. I think overall, we have made sure that the dealer remains profitable. Going forward, we will continuously keep track of this aspect, which would surely arise when the volumes come down. We are very confident that we will be successful in keeping the dealers' strength, especially the financial strength, quite intact. Thank you.
Thanks a lot, sir. Thanks a lot and best of luck. Thank you. Take care.
Thank you. We take the next question from the line of Raghu Nandhan from Emkay Global. Please go ahead.
Thank you, sir, for the opportunity. Sir, firstly, for Q1 FY2021, who has been the industry shift towards petrol vehicles? Has it reached 85%, a level at which Maruti can sustain 50% overall market share despite being absent in diesel vehicles?
While the official SIAM figures are not yet released, the indications are we have a very good idea of what the diesel ratios are. For the industry, it is now about 20.6% in Q1. Remember, last year, it was 28.5%. There seems to be a 29.5%. There seems to be a downward shift. Maruti, of course, is at 0% because we do not have diesel. As far as competition is concerned, they are at 26%. Overall, there has been a reduction from 22.5% for last financial year to 20.6% in this quarter. I do not know the calculation of that 18%, 16% which you made for that 50% market share. As far as retail is concerned, the market share for Maruti in Q1 was slightly above 52%.
Thank you, sir. My second question was on RM cost. RM cost per unit was on the higher side. Would Gujarat plant depreciation also be one factor contributing to this increase?
Sure. The Gujarat depreciation is part of the manufacturing and other costs. It is not combined with the material cost. The other fixed cost of the Gujarat plant will go to the material cost. Depreciation is a lease expense, which is, it gets merged with the manufacturing and depreciation expenses.
Got it, sir. Thank you so much. That's all from my side.
Thank you. We take the next question from the line of Gunjan Prithyani from J.P. Morgan. Please go ahead.
Yeah, hi. Thanks for taking my questions. I have two questions. Firstly, on the financing environment, if you can speak about it, is this whole moratorium issue creating a problem for people to access financing? I do notice that you've done a lot of tie-ups on the financing side. How has been the response? Is that really helping in terms of enabling the financing?
Yeah. As regards the financing, there are two parts to it. One part is relating to the inventory financing, which dealers take for offtake from Maruti Suzuki. The other part is, of course, the retail financing. I think your question is pertaining to the retail financing. For retail financing, we have, as you rightly pointed out, now collaborating with various banks for the different types of flexible schemes which consumers have been demanding post this COVID. The flexibility is in terms of initial down payment being low or such a scheme as a step-up EMI payment scheme where initially you pay less EMIs and later on, when your income levels are restored or you are feeling more confident, you have a higher EMI. We also have schemes like the balloon scheme where a large portion of the loan amount is actually towards the last EMI.
As regards to banks lending, the banks lending, the interest rates have come down in response to the repo rates which have come down over the past few months, but not as much as we would have thought they would. Nevertheless, it's helping because although the banks are re-looking at the credit ratings of the consumers once again because probably of this COVID situation, they are reassessing the credit ratings of the consumers. In terms of the penetration of the finance, there doesn't seem to be any difference at the moment. We see the penetration somewhere between 78-80%, which is the normal percentage of penetration across the last few years. Thank you.
We haven't really seen any issue on the financial side. Okay. On this second question I had, it was on this subscription service foray that you made. If you can just talk us through it, what process and how we are approaching it?
Yes. The subscription process or the demand for subscription has been increasing in the last few years. Of course, it's at a very low level at the moment. Post-COVID, we are expecting, and people are shunning shared mobility as also public transport, and the demand for personal transport increases. One of the very good options is subscription. That is the thing which we are trying in two of the—we are doing a pilot in two areas. One is Bangalore and the other one is in Gurgaon and Manesar. There we have found some very good response. We started it just a few weeks back.
I think going forward, we would see, we do hope that subscription will also become a pretty good business because we are doing it on a digital platform along with one of our partners. The way we have seen the inquiries and the conversion now coming through, I think it can be a significant game changer going forward.
Okay. Last question, if you can share. The inventory level you did mention has come up very meaningfully. Is there a number that you can share?
For the end of for the industry, I think the industry level is at around 170,000, according to our information. You can give a few hundreds here and there. The March inventory level for the industry was 250,000 approximately.
For Maruti, if you could share.
For Maruti, it's around 25 days. It's roughly about 80,000 inventory end of June.
Okay. Got it. Thank you so much.
Thank you. We take the next question from the line of Pramod Amthe from CGS- CIMB. Please go ahead.
Yeah. Hi. This is with regard to the G segment. I want to know if you have done some consumer survey in terms of when the customer comes to look out for the retail with you and when he does not find what is his behavior, does it completely shift over to the competition, what proportion, and how much you have been able to convert? The second, linked to the same, how do you look to address this issue in the short-term, medium term?
Which segment are you referring to? I'm sorry.
The diesel segment. The diesel part of it.
Oh, the diesel part. Yes. Just a brief perspective. Actually, if you look at the diesel fuel price compared with the liter of gasoline, these prices have been converging dramatically, actually. Remember, they were just about they were about INR 32 difference six, seven years back. Last year, it was about INR 7.80 or something. Now in some states like Delhi, Goa, Gujarat, Jharkhand, Puducherry, Odisha, the diesel and the petrol prices are extremely close. Therefore, now it does not make economic sense to have a diesel car if the criteria is running cost because the running cost is roughly similar, about INR 4 a kilometer for both. Secondly, the initial price which you pay for a diesel vehicle for a similar type of petrol over similar type of petrol vehicle is now ranging between INR 150,000-INR 200,000.
With this large difference in acquisition cost and a very low difference or none at all in the running cost, there is no economic logic for a diesel vehicle. That is pretty clear from the diesel percentage which we have seen decreasing, especially in the smaller car category where they have now decreased dramatically to less than 5%. Of course, there are some segments like the mid-SUV and above where people are still looking for some amount of diesel because there the preference seems to be based on torque requirements rather than on economic requirements. That is why we have said that Maruti Suzuki is also looking, as far as the larger diesels are concerned, very closely to evaluate whether it requires to be present in the larger diesel category. Thank you.
The second one is, have you seen as the larger cities or do you see any change in consumer profile as the economy is opening up in terms of when you say compared to the earlier days, the demand is almost 85-90%? Have you seen things for employers or corporates who are the ones who are coming in and figure with the customer profile?
Yeah. I would just say that in terms of the profiling, maybe the salaried percentage has gone up roughly, I'm talking from Maruti's perspective because we have some detailed data about our consumers. Our data points suggest salaried customers going up almost 50% from the 45% they were earlier. In the other categories like self-employed, it's been more or less similar. Business customers have come down a little bit. Government salaried customers, it's part of that 49% that I was referring to, has gone up slightly. The average MHI has come down a little bit, but I think it's different for Arena and NEXA. There we don't see that it's statistically significantly different. Thank you.
Thanks a lot, guys.
Thank you. We take the next question. We take the next question from the line of Jinesh Gandhi from Motilal Oswal Financial Services. Please go ahead.
Hi, sir. You indicated retail was substantially higher in this quarter. Again, from the wholesales of 57, what would be the retail numbers?
The retail is around 119,000.
Okay. Okay. Secondly, on that, beyond this breakup of salaried employees and that way, what would be the share of first-time buyers now given the expectation of shift towards private transport?
I didn't get your question. You are saying in the terms of profiling?
Share of first-time buyers?
Share of first-time buyers, yes, it has gone up. As I mentioned earlier, it's gone up for us by a substantial 5-5.5 percentage points.
Okay. Okay. The second question is to Mr. Seth. After we have seen substantial increase in realization, simply dividing net operating revenues divided by total wholesale, what would have led to this? Have you seen substantial increase in spare sales or any non-vehicular revenues which is driving this?
Not really. I think it's the mix impact of the regular mix that you said in the quarter. This is not really comparable this quarter because the size is so small that it depends on what cars are being sold higher and what cars. It's not giving you a really meaningful ASP for this quarter. I think it will be more relevant to see the full year.
Okay. Okay. Can you share export revenues in this quarter?
Import revenues are at INR 461 crore in this quarter.
Okay. Lastly, if you can share the production side, how are you placed now in July currently and what are the plans for and any bottlenecks which you see?
We are currently doing a run rate of about 4,000 plus per day. Currently, because of increased incidence of the infection in Gujarat, we are only running the Gujarat plant on a single shift. Starting mid-August through September, maybe first half, we plan to open the second shift in Gujarat. Of course, subject to a lot of enabling conditions like availability of manpower, like the infection should remain within, should remain checked. If we add a second shift in Gujarat by about September, we should be able to add about 900 per day more. As of now, we are not limited by demand. We are limited by supply. Our effort is to increase supply. We also have to be mindful that there are a lot of local lockdowns across cities or states of different kinds being imposed all over the country.
Our vendors are located in about 46 districts over nine states. Sometimes they witness these lockdowns. Our strategy is wherever the vendor is, at whichever point of time he is, let him keep producing to the maximum and keep stocking. You never know when the lockdown will hit him. At least the stocks and the inventories will help during such lockdowns. That is the strategy that we are adopting. It all depends on so many factors, particularly the growth of the infection in the country or whether it remains in check.
Right. Right. That's a pretty dynamic situation, I know which way. This 4,000 per day is including Gujarat, right?
Oh, 4,000 is total Haryana plus Gujarat, 4,000 plus.
Okay.
If we are successfully able to have a second shift running in Gujarat in the second half of August through September first half, then we should be able to add about 900 more.
900 more. Okay. In any sense, what was the production in Gujarat in one year?
Sorry?
Gujarat's production in first quarter or the price from Gujarat in first quarter?
See, that will be highly, first quarter is a highly misleading figure. It all depends on the start date. It depends on how many days we took to just establish protocols. Even after the plant started, almost a week to two weeks was spent in establishing the safety protocols and all the systems that had to be in place, training of people. That one would not give a right picture. The current rate from Gujarat is about 900 plus per day.
Okay. Okay. Got it. Thanks. I'll come back in. Thank you.
Thank you. Next question is from the line of Amyn Pirani from CLSA. Please go ahead.
Yes. Hi. Thanks for the opportunity. My first question was actually on the financing tariffs. I'm just trying to understand, I mean, what is new in these tariffs in the sense that I'm sure that for a Maruti customer, most of the bigger financial institutions would already be empaneled. Is there some kind of a comfort or a subvention or something else that Maruti is doing with these finances, or is it, so how does the tariff work for you on a commercial basis?
Yeah. There is no subvention, first of all. However, it's not correct to say that these schemes were available in the normal course as well. While the different banks might have been doing retail financing with us, it doesn't necessarily mean that they were offering these flexible schemes earlier. They were not. Including, for example, flexibility in terms of down payment.
Clearly, or even in terms of the % of the on-road price financing. I think those are things which come out because together with the banks, when we discuss with them, we make them realize that this is the consumer requirement. That market input, the consumer insight, I think is very essential when it comes to those good banks who listen to the consumer requirement and tailor-make their schemes accordingly. That is what you have observed in the last three months with those special schemes that we have floated across many banks with our customers.
Okay. Okay. That's helpful. My second question is, you talked about the fact that discounts for vehicle increase because of the mismatch in wholesale and retail. If you were to look at like-to-like model-level discounts, would they have come down in your opinion, or they have remained stable? How would that be?
They would have come down. Of course, it depends, remember, from geography to geography, and it depends from model to model. Generally speaking, model to model, it would have come down.
Okay. Okay. Okay. That's helpful. Thank you. I'll come back in this room.
Thank you. Next question is from the line of Kumar Rakesh from BNP Pariba s. Please go ahead.
Hi. Good evening. Thank you for taking my question. My first question is to Shashank. Last quarter, you have said that it's a little early to call out trends. The advantage of some time behind us, can you share some of the broader insights your consumer is purchased with? Some of it you talked about around downtrading and all. Beyond that, what are you observing? How the sales pattern in after-sales servicing like spare parts, if that's similar to how the latest sales is happening and which are the most impacted segment of consumers? Any other area which you have noticed is worth mentioning?
Yeah. I think largely everything follows from those inquiries and bookings that we get for new car sales. And then we have the retails. We do have the business for accessories. We also have the service of the vehicles. Servicing of the vehicles, of course, has come back very strongly. The only difference between when the local lockdowns happen and many of the workshops get closed, then it's a little different from sales because sales, you can do a retailing maybe the next day. In service, the capacity once locked for that day gets locked. Even if your customer comes the next day, then obviously you have customers of the next day plus the customers of the previous day. There seems to be a more effect there. However, it has been a strong bounce back, and I mentioned that.
On the first part of your question about the broad customer behavioral change, I mentioned about the down telescoping of demand. There are also the first-time buyers getting increased, the functionality buying going up. We have also seen people sort of gravitating towards the more established brands like Maruti Suzuki, for example, because when the market becomes a little uncertain, the consumers become less experimentative. That is also something which we have observed. We have also observed that while the replacement car buying has come down, the additional car buying is going up, and as also the first-time buyers. The reason there is that people are preferring personal transport and sort of avoiding public transport. Those are the other trends which we have witnessed.
Apart from the general trend, of course, in line with the health consciousness regarding the COVID, people are preferring to go through the digital route for most of the transactions.
My next question is just an extension of that, Seth. Based on the trends which you have noticed so far, what would be your best estimate for the festival demand which is upcoming? Not participating directly, but would it be higher than last year, similar, or lower? Essentially, how will you be preparing your supply side? Of course, keeping the unknown unknowns outside. How will you be looking at the festival demands coming today?
Yeah. As I mentioned, I think in the first part of this discussion or question-answer session, we had, as I said, going forward a lot to depend on the COVID sentiment. We really do not know which way it would move. Suppose you say the vaccine is discovered tomorrow, fine, then the thinking becomes totally different. If there is a second wave of virus, the thinking becomes totally different. Long term, of course, it depends on the fundamentals of the economy. Having said that, the reason why festival demand always seems to be better is because car buying, being a discretionary purchase requiring positive sentiment, during the festival season, everybody seems to be having a more proclivity towards expenditure. That is why that is what fuels the demand, spurts in demand in the festival generally.
I'm not sure, and I'll still maintain that I'll not take a position on that, how much will it increase. Leave aside, if everything remains the common, of course, the festival does bring in positive sentiment.
Thank you for that. I'll come back in that too.
Thank you. We take the next question from the line of Binay Singh from Morgan Stanley. Please go ahead.
Hi, Neema. Thanks for the opportunity. Just would like to mention that in the near term, production is a problem. Do you think the towns further trending down in July versus the latest that you saw in June?
Sorry, once again, are you seeing?
Seeing the towns down in July versus what you were seeing in June?
Sorry, Shashank's question.
Yeah. I would say, again, with the caveat that it depends on geography and model. Generally speaking, July discounts are lower than the quarter one discounts.
Okay. Secondly, Maruti has sort of one new model that you launched timeline. A, are you remaining committed to that? B, because of COVID, is there any change in product strategy that you are planning?
Actually, our product plans, as you know, are made product plans in auto industry are actually made well in advance because there is a period of incubation of three to four years before a new car is launched. So those launch plans or the development work does not get really changed dramatically if there is a disruption in between for a couple of months, as we have seen. What does get disrupted probably is some development work which is possible to be made up in time later on. As regards to new car introduction, we are launching the S-Cross with the K15 petrol engine, which is extremely powerful and very smooth and sophisticated vehicle, which we will be launching in the first week of August. Beyond that, I will not be able to give you the specifics of our product plan for the future.
Just last thing on the longer term, on the product side, which segment, we've seen SUVs as a sweeping phase rising. Would it be fair to assume that that will be one of the key focus areas in your product strategy over the next three years or so?
Sure. As you know, we keep looking at opportunities and study different segments, the potential. That's the reason why we are able to maintain our market share, as we have done in the past, introducing some very successful models at times when people said, "Why would Maruti Suzuki bring this vehicle?" For example, Swift or Baleno or, for that matter, the Brezza, the small SUV, or the Ertiga, which was the first affordable MPV in India. We will keep looking for those opportunities. Yes, some of the opportunities and the trends which you are seeing for the SUV does exist. We keep watching, and at the appropriate time, we'll take suitable action.
Okay. Thanks.
Thank you.
Thank you. We take the next question from the line of Sonal Gupta from UBS. Please go ahead.
Hi. Good afternoon, everyone. Thanks for taking my question. The first question I had was, could you give us a sense of, for FY2020, what was the share of industry demand coming from top 10 cities and 11 to 20 cities? Related to that, I mean, given that these markets have been more impacted by the shared mobility, I mean, how do you see these markets sort of on a more normalized basis going forward? I mean, do you see a big bounce back in demand from these markets? Yeah.
Yeah. Industry contribution in the top 10 cities for 2019-2020 was 56%. 11 to 20 cities, the 11th rank to the 20th rank is 12.1%. From 21st to 40th cities, 40.2%, and for the rest of the cities, 37.6%.
Sorry. Rest of the cities is? I mean, compared to 40th, right? That's what 14.2%?
Okay. 40th. 40th. 14.2% is 21st to 40th.
Okay. Okay. Your thoughts on the shared mobility versus now personal mobility, how does that impact this market?
Yeah. Actually, there is a little bit of even last year, when the market went down, there was this thought that it's largely because of shared mobility. Shared mobility, the opinion seems to be divided amongst the industry people whether shared mobility was really the cause. We think it was the cost of acquisition more than the shared mobility thing. The shared mobility percentage is still small. Going forward, I think post-COVID, we would expect shared mobility actually to decrease dramatically as people shun public transport and shared mobility in favor of personal mobility. I think going forward, it would have even probably a lesser effect in the short run. Long-term effect, yes, people do tend to revert back to the older method. At that time, I think the debate will start again, what will be the effect of shared mobility on the auto demand?
Thank you.
Thank you, sir. Just one, you also mentioned that we're seeing a shift towards a good trend in terms of used car market. Could you give some, I mean, share some numbers around that? What sort of increase have you seen in used car prices? Is there an increase in used car prices as well? Any thoughts there?
Yeah. One, I think it's too early to get to those trends. However, as I mentioned, on the demand side, there seems to have been an increase because we look at parameters like inquiries, which seem to have been doing pretty well in the pre-owned car market in line with the consumer research data as also with the logic and intuition which we can sort of experience regarding demand towards the used car market. However, as I said earlier, on the supply side, there seems to be an issue because people are holding back on their older vehicles, which means that there are fewer vehicles to buy to be able to be refurbished and sold as pre-owned cars. I think that is a supply side issue rather than the demand side. The demand side, as reflected in inquiries, seems to be pretty strong.
On the other hand, the replacement buying has actually dropped. For Maruti Suzuki, generally, it's around 25%-26%. In the first quarter, it was about 16%-17%.
Okay, sir. Just lastly, for the rural, I mean, what is the share of, I mean, how are you seeing the share of rural now? Just could you give us a sense of what is the profile of customers on the rural side?
Yeah. The rural markets, as we said, have been bouncing back a little bit more strongly for reasons because the rabi crop has been pretty good. It's been record. The kharif crop sowing has been also very good, 20% more than last year at the same time. The COVID sentiment is a little less negative because most of the hotspot areas are in the urban areas. Yes, rural seems to have done better. There is no change really in the profile. The profile difference between rural and urban has remained as such because I don't think the profile would change so suddenly. Again, we have only one quarter of data to look at.
Okay. Great, sir. Thank you so much for answering those questions.
Thank you.
Thank you. Next question is from the line of Ronak Sarda from Systematic Shares. Please go ahead.
Hi. Thanks for the opportunity. Just continuing on the previous question on the top 10 cities, I mean, if we even look at the top, maybe the metros, we are seeing some easing out happening on the lockdown side. The net cases seem to be coming off. I mean, but based on your discussion with customers here, I mean, do you see the demand recovering quickly, or do you think the festive season would again be a bit uncertain? Just purely based on your customer interactions with the previous team, how do you see the demand for the metros in the next few months?
Yeah. I think we do have some data points from June and July. I think the previous question was relating to the top 10 cities' demand as a percentage of the total sales last year, which is about 54%. Actually, in the first quarter, it was pretty less than that. In fact, in July, since the lockdown has been lifted in many parts and seen for the last one week or so that the demand seems to have come back in the urban areas also. I think while in the first quarter, the demand in the top cities was less than the thing, but in the last few weeks, I've seen there is some upsurge in the demand in the top 10 cities as well.
I think it's too early for us to take a position on how it will pan out in the coming few days. The response at this time seems to be encouraging for the areas where the lockdown has been completely lifted.
Sure. The part two of this question is, how do you see competitive intensity right now? I mean, how do you think that will shape up given this has been a huge disruption? Do you see, I mean, what kind of implications would this have on the overall competitive scenario? I mean, July, again, retail sales, would you say it is around 85%-90% of last year that is currently?
I'm not able to give you the forward-looking projections for July, but the trend seems to be good at the moment.
On the competitive side, how do you see what implications do you feel this will have on the competitive intensity?
Yeah. You will get those numbers in a few days' time, I'm sure. First August, we release the numbers for the month of July. When you are talking of the competition, obviously, they're strong. We are fighting in all segments as always. We keep trying to maintain our market share. I really don't know what to say and what exactly is the question regarding competition. It's going to be there. It is there. I'm sure it's lurking out there somewhere.
Sure. Sure. Last question for Ajay Seth, sir. For other expenses, I mean, if we see for this quarter, do you have any exceptional item here, or this is something which was, I mean, all the discretionary which could have been cut have been cut? Or do you see there are some one-offs still there in Q1 numbers as well?
is no exceptional item except for the fact that we have contained costs this quarter based on much lower production. A lot of cuts across all verticals have happened this quarter as the specialty expenses have been cut. If the production goes up, we will see if we need to state some of the advertisement-related expenses, marketing-related expenses later on. This will all depend on how we plan out the next few quarters, how it pans out in the next few quarters. There is no exceptional item. The only exceptional item, as I mentioned earlier, was in the materials cost, where we had this fixed cost incidence of about INR 110 crore or so, which was because of the lowering of inventories, which over the year will get normalized.
Thank you. That was the last question.