Maruti hits a major milestone

Written by Rishi Raj | Updated: Mar 23 2010, 02:02am hrs
March 23, 2010, is a momentous day in the history of Indias auto revolution, as the homegrown Maruti Suzuki India would enter the select club of auto manufacturers to have produced and sold 1m vehicles in a single financial year. Well, the homegrown prefix to Maruti is not out of place since the Indian government was a 50% partner with Japans Suzuki Motor Corp for a long time, long before the word disinvestment came into political usage, and in a way had provided this joint venture agreement protection from scrutiny by Parliamentary and several other committees. Despite these luxuries, Maruti had to face obstacles from the government babus in its 26-year long journey.

Marutis success also brings home a larger point that Indias bureaucrats can be some of the most able managers, as the company has largely been steered by former bureaucratsV Krishnamurthy, RC Bhargava and Jagdish Khattar. Of the three, Bhargavas relationship with the company continues as he currently serves as its chairman. The enterprise of these individuals was best tested because they fought on two frontsjoint secretaries housed in Udyog Bhawan and the marketplace.

The year Maruti achieves the 1m tag in a single year is, doubtless, going to be one of the best years for the countrys auto sales, breaking its previous record in the year 2006-07. Though the final figures are yet to come, it is quite clear by now that the auto industry is expected to break its boom year sales record of 10m units this fiscal at a conservative growth estimate of 10% projected by the Society of Indian Automobile Manufacturers.

In fact, the calendar year 2009 serves as a better guide, as it saw the auto industry creating a record of sorts with major manufacturers achieving their best-ever sales. For instance, Marutis domestic sales in 2009 were up 19.9% to a record of 8,36,891 units as against 6,97,845 units in 2008, while Hyundai, which is the countrys second largest passenger car manufacturer, reported a jump of 14.4% at 5,59,880 units, its highest cumulative sales. True, much of this is also on the back of the stimulus package the government rolled out in the form of an excise cut and a low base effect because the year 2008-09 was one of the worst years in terms of sales.

However, Marutis milestone is clearly linked to the country emerging as a hub for small cars with later entrants like General Motors, Honda Motors, Toyota et al now jumping onto the small car bandwagon. In a way, this was bound to happen. But, by the time most of these manufacturers decided to enter the Indian market, Maruti was firmly ensconced with its enviable dealer network, matching which would have cost them a fortune. Naturally, most of the global car majors who entered India first came through their mid-to-upper-end segment vehicles and are only now looking at the small, compact cars. Hyundai, the only exception, first mulled launching its sedan Accent but later reversed its strategy to come out with the hatchback Santro!

The coming of the Maruti-800 way back in 1983the only vehicle from the companys stable that did not even have a name but was only known by its cubic capacityslowly created a buzz around the Indian auto industry, which then stagnated at a volume of 40,000 cars a year. As compared to two car models Fiat and Ambassador then, over 50 models are produced today by 12 manufacturers in the country. The overall turnover of the Indian auto industry is about Rs 1,50,000 crore.

The uniqueness of Marutis strategy was developing a network of dealers and workshops across the country before launching its car. This not only enabled it to produce cars but also built a manufacturing base in the country through a network of auto component makers, which came in handy when other global car manufacturers flocked to India.

Going ahead, the challenge for the company is to retain its slightly more than 50% marketshare in the passenger car market.

Although mainly known for its expertise in the small, compact car segment, the company is now present across all variants. It has even entered into the diesel engine segment and is ramping up its production facilities. Though its oldest warhorse, the Maruti-800, is facing fatigue with falling sales and the phasing out of key markets due to newer emission norms, it is no more a cause for worry as the company has successfully built a string of products in that segment.

However, going forward, it will be exciting to observe the way Maruti tackles the challenge from Tatas small car, Nano. So far, Maruti has not shown any visible interest in getting into the below-800cc segment to directly take on the challenge of Nano. Critics point out that if Nano is successful in capturing the imagination of huge two-wheeler riders, it would be a major dent in Marutis bastion. However, Marutis former managing director Jagdish Khattar had an interesting take on the matter when he said that the Nano would certainly be the preferred buy for two-wheeler owners, but as and when they planned an upgrade they would come to Maruti. So, Marutis market would remain intact!