The edge that Maruti Suzuki enjoys over Hyundai and other rivals stem primarily from its gigantic scale.
Maruti
Suzuki is not just the country's biggest car maker with a fifty
per cent market share. It also makes a significantly higher profit on
each car than the industry peers including its nearest rival and
Korean car maker Hyundai
.
Car
makers do not share the profit earned per car though they declare the
total profit earned in a year. This profit also includes money made
on sales of spare parts though it is a very small part compared to
vehicle sales. A back of the envelope calculation, however, can give
an idea of the profit these manufacturers make per car by simply
spreading the total profit over a number of cars sold to arrive at an
average number. It is true that the profit on different cars would be
different. The smaller ones, for instance, will give lower profits.
Let
us take the case of Maruti Suzuki, which sells every second car in
the world's fifth biggest market. The Suzuki promoted company made a
record profit of Rs 77.21 billion in the year ended March 31, 2018,
when it sold a record 1,779,574 vehicles (a fraction of these were
the newly launched light commercial vehicles). A simple calculation
shows the company might have earned as much as Rs 43,386 on an
average per unit. This is an impressive profit considering the
average per unit realisation of Rs 397,000 for the year, announced by
the company in April.
Hyundai
is not a listed company in India and its financial results are shared
with the registrar of companies with a time lag. Information with the
Korean parent, however, shows that it made approximately Rs 22
billion in profits in the year ended December 31, 2017. In the same
year, it sold a record 678,221 cars. The annual profit translates
into a per unit share of Rs 32,437.
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