Take for instance German carmaker Volkswagen's plans to come out with a car similar to Alto's price band, but different in design and style. The car giant has already made its plans in India amply clear after the successful launch of its hatchback Polo earlier this year. Though globally the Volkswagen group holds over 19% stake in Japanese auto company Suzuki Motors, it is not going to stop them from exploiting the small car market. The company, however, is yet to fix a timeline.
Rival to Maruti Suzuki, Hyundai Motor India is also looking to launch a small car that would be priced below Hyundai Santro and is expected to hit the roads by 2012-13. The company is so far tightlipped on the plans, but has already sensed an opportunity and is rearing to go. Director for marketing Hyundai Motor India Arvind Saxena told FE that the company seeks to be present in most segments and since the small car market is a major volume generator, Hyundai had decided to enter this space. We realised that we did not address the small car segment hence we decided to enter this space. This is a very large segment in India and with the strong Hyundai brand recall it will give our company the scope to grow, Saxena said.
Over the past one year, Alto has not only been replaced as the entry-level car by Tatas much-hyped Nano, but has prompted the company to bring about key changes in the car to keep the customer engaged with the product.
Sources say the new Alto that Maruti is going to come out with will be powered by the K-Series engine and is going to be called Alto K-10. The new Alto is expected to cost anywhere between Rs 5,000 and Rs 10,000 more than the existing one. The older Alto costs around Rs 2.3 lakh. Maruti last refreshed its Alto in July 2005.
Though specific plans of such automakers demanding a share in the small car segment are still at a drawing-board stage, come 2012, Indians may have a slew of choices when it comes to picking the right small car for them. Analysts argue that the domestic auto market is set for a complete overhaul, especially if global car makers are able to penetrate the small car segment, or the Alto segment, as its popularly known.
An analyst with a global consulting firm spoke of the new trend that was emerging in India on how first-time car buyers wanted to settle for a non-Maruti car especially because of the power of international brands like Chevrolet and Fiat. The small hatchbacks like Figo and Beat represent the new age small cars that are cool to look at and has a very trendy appeal to it, he said.
He explained that for Alto to rake in the high numbers that it has habitually witnessed since its launch in 2000, it had to not only maintain the same price band, but also look at minor exterior changes that would make the car look jazzy and youthful. Maintaining the price band will be very tough because of the rising raw material costs. Maruti will have to look at investing in its look and style, he added.
But owing to Maruti's high penetration levels and serviceability, it could take years before any car company comes even close to its Alto. Maruti is know for its serviceability...they have opened service centres across the country. It will be very difficult for the other global car companies to replicate, the analyst said.
In fact, other carmakers are looking to address the issue of serviceability by increasing touch points and dealerships. GM has, however, decided to take on the issue head on with the promise that for the first three years of the purchase of the car the servicing would be absolutely free. Ford, Volkswagen, Nissan, GM and Toyota are investing heavily in India to create a strong customer base.
Recently, Maruti Suzuki's managing executive officer for sales & marketing Mayank Pareek had told a group of reporters in the company's plant in Gurgaon, Maruti focuses on keeping these (service and spare) costs low with its local expertise. I believe, and this is a humble submission, that we know the market slightly better than other car makers, he said.
But Maruti has sensed the danger of rising competition and has already started putting together the final touches to its brand new Alto. In a recent interview with FE, chairman of Maruti Suzuki RC Bhargava revealed that the company will come out with a refreshed Alto, but refused to give a timeline for that. Alto will be subject to a facelift and model changefor a long time it has not happened. Something has to happen nowbut I dont know the time, he said.
The news did not come as a surprise because of the slow erosion of the company's market share in the recent past. Bhargava said the company would look to retain the 50% market share especially for setting the company a goal.
Recently, the company completely overhauled its second-highest selling car WagonR and invested a whopping Rs 290 crore on it. Typically, the car company invests around Rs 50 crore for the facelift.
The recently launched newer models (Figo, Polo, Beat) have better features than Alto, but they are in the same price band. Maruti had no choice but to alter it (Alto), said Vaishali Jajoo, analyst with Angel Broking.
Analyst with Mumbai-based securities firm SSKI Securities S Ramnath said Maruti will look at newer ways to upgrade its existing models to take on competition. Car business is all about creating a buzz in the market...other car makers like GM and Ford have been able to do it. Even Maruti will have to look for the oomph factor, he said.
Last year in 2009-10, when the Indian automobile market clocked 12 million units, Maruti Suzuki's Alto sold a whopping 2.5 lakh units. The A2 segment alone sold a whopping 11.28 lakh units out of a total of 15.26 lakh units in the passenger car segment. Per month, the company sells roughly between 17,000 and 18,000 units per month. In the near run it could be literally impossible for any other car to match the company's Alto sales. But yes, the company's market share will be severely tested, another analyst said.