Even at its peak when it controlled 70% of the market, Maruti Suzuki was always clear the competition would soon come calling. Jagdish Khattar who ran the country’s largest car company never lost track of the fact that it could only lose market share, as is typical for a market leader with a disproportionate share of the pie. As he often remarked about rival car makers Hyundai Motor India, General Motors, Daewoo Motor, Mitsubishi and Honda, “even if they sell one unit in the market, our market share will decline”. Nearly two decades later, Maruti commands a market share of nearly 52% of the car market, Hyundai 22.32% and Honda Cars, 8.4%.
In 17 years, Hyundai’s sales have gone from zero to 4,20,688 vehicles in 2014-15 and the Korean car maker now commands it highest ever market share in India at 16.1%; drop utility vehicles from the sample and the share is a higher 22.32% (Hyundai doesn’t have a mass market utility vehicle). The targets, of course, keep pace with sales; for 2015 it is 5,00,000 units. As does the bottom line: in 2013-14 Hyundai reported revenues of R25,229.27 crore and profits of R1,108 crore. Honda, the country’s fourth largest car maker, is in the red as are Volkswagen, Skoda and General Motors. Maruti, of course, throws up enviable numbers each year; in FY14, the company reported profits of R44,451 crore on revenues of R2,832 crore. In the nine months to December it reported a total income of R36,249 crore and profits of R2,427 crore.
Rakesh Srivastava, a 15-year Maruti veteran, who joined Hyundai three years back and heads its sales and marketing, is working hard to not just grow volumes but maintain quality. “Competition is good. Companies that bring in more and better options will thrive… The largest cost is in creating a platform. Sometimes it takes more than R6,000 crore to create one platform,” he said.
Srivastava, the second lateral hire at Maruti after Arvind Saxena, who was his predecessor in Hyundai, points out that while Maruti bet on price and a compact size, Hyundai decided to bet on value. Santro, Hyundai’s first car in India, boasted power steering which the Maruti 800 didn’t.
It was probably a better looking hatchback with more space and not surprisingly sold 75,690 cars in the first year of its launch. Cashing in on the success, Hyundai launched the i20—the first hatchback to have six airbags. Industry watchers agree Hyundai was able to create a new segment through the i20—the premium hatchback segment. In the month of March alone, the new i20 Elite—has sold 12,000 units.
But the competition is doing well too; Honda, for instance, grew 83% in 2014-15. In response to the i10 and the i10 Grand, Honda has come up with the Brio while for the Xcent, Honda has the Amaze and for the Verna, the City, which sells more than twice the number of units as the Verna. To take on the i20, Honda is launching the new Jazz and both car makers will soon have a compact SUV. In the multi-purpose vehicle category Honda has Mobilio, Hyundai doesn’t have an offering, but is planning to launch one, soon.
Maruti is not lying low either. In the sub-5 metre category, which has the Swift and the Dzire, it sold 4,95,999 vehicles, which is more than what Hyundai sold putting all its vehicles together. Hyundai’s Eon and Santro together sold 97,075 units; in comparison Maruti sold 4,25,742 cars in the mini-hatchback category. Verna had a free run when City didn’t have a diesel engine, and Maruti didn’t offer major competition in the form of the Ciaz, which it launched to compete with the Verna. Verna, based on a four-year platform, now sells less than both the City and the Ciaz. The new Verna, often called the “City killer” internally at Hyundai, will enter the market by the end of 2017. “The current Verna, which was launched recently, is just a facelift,” said Amit Kaushik, auto analyst at IHSKaushik.
Other car makers too have come up with popular models; the Ford Ecosport is one such model that has turned out to be a success. Nissan and Renault had the Terrano and the Duster as successful models. Toyota also grew 10% in the last one year. Its Etios and Liva are popular with people who like cabin space and last year it launched the new Corolla Altis.
Industry experts also believe that the market will become more competitive. “Things are going to be really tough as everyone would want a larger share of the market. Toyota, Ford, Nissan, GM, Mahindra, Renault—all these players will be extremely competitive, especially in the small car space,” said Abdul Majeed, auto analyst at PwC.
To sustain market share, Srivastava says it is important to have a good distribution team, something he had built when he was in Maruti. Maruti has over 1,500 dealerships while Hyundai has only 731, which includes 320 rural outlets. Rural sales are another area where Hyundai has to play catch up; 37% of Maruti’s sales come from rural India. For Hyundai, it is only 21%. But Srivastava said Hyundai is seeing an increasing demand for premium cars like the i20 in rural India. “Because of the influence of audio and visual media, the aspirational quotient is very high,” he said.
Hyundai has another “good” problem. At an overall capacity of 6,80,000 vehicles, it already manufactures 6,11,889 units. To meet the growing India demand, it stopped exports to Europe, which gave it an additional capacity of 60,000 vehicles. But with domestic demand set to shoot up further, Hyundai’s plant will hit full capacity in another year or so.
Hyundai is growing, but its competition is growing too. In its second phase Hyundai might have picked up on Maruti and snatched some market share, but now it is fighting a much stronger Maruti Suzuki and a more resilient Honda.