Hyundai rides on Creta and Venue to beat Maruti on operating margins

Hyundai Motor India has overtaken Maruti Suzuki, the mass market leader on operating margins last fiscal year for the first time in almost a decade, according to a report in The Economic Times. This came on the back of strong demand that stemmed from high margin sports utility vehicles Creta and Venue. In the last five years, the South Korean auto company has been closing in on the market leader in profitability and revenue and has sold just about half the number of cars Maruti Suzuki dispatched in 2021.

Hyundai operating profit increased to 10.26%

Hyundai’s revenue rose 5% annually between FY16 and FY21, which was faster than Maruti Suzuki’s growth of 3.38%. The company improved its profitability due to the high operating leverage, better management of raw material cost and lower expenses. This led to the operating profit per vehicle in FY21 to reach Rs 72,471 for Hyundai, which was almost double of what Maruti Suzuki achieved.

While reviewing the FY21 performance, the report noted that post-lockdown last year, Hyundai was able to bounce back to its normal domestic sales of 38,200 units in July 2020, clocking 97.92% of its sales for the same month in the previous year. The momentum in growth was carried to the consecutive three quarters, with an average increase of 20% in MoM sales. This was clearly reflected in the operating performance of the company.

It also said that for the first time in nine years, the operating profit margin of Maruti Suzuki slumped to single digits, while Hyundai Motor India’s operating profit grew by 0.29% to 10.26%. Also, the operating profit was 78% of Maruti as compared to the five year’s average of 42%, while the volume sold by the Korean car maker was 39% of Maruti Suzuki.