Sitting inside his company?s stall ??the largest at the just concluded Auto Expo 2010 in New Delhi?s Pragati Maidan??the stoic, almost Zen-like expression on the face of Shinzo Nakanishi, CEO of Rs 21,777-crore Maruti Suzuki, India?s largest carmaker by sales, almost belies his current, combative mood. ?Starting this year, there will be very high pressure on us from all sides, including pressure from (commodity) prices and from competition. But, we will do everything to defend our 50% market share. We will try to absorb the price increase as much as possible,? Nakanishi told FE then, providing a glimpse of his eagerness to get battle-ready fast. And with good reasons.
It has been almost a 28-year-old roller coaster ride for the company that accounts for over half of all cars sold in the country. In December last year, Maruti Suzuki became the first car maker in the country to cross the one lakh retail sales in a month milestone, clocking 1,00,874 units sales. Its supremacy in the domestic market has never been seriously threatened, until now.
About 1.6-million small cars were sold in the country last year, accounting for over three fourths of the Indian car market. And Maruti, thanks to its early entry and a market-ready range of small cars, has towered this segment like a colossus, come Hyundai or Tatas. Maruti sold 730,000 cars in the April-December 2009 compared to 420,000 units sold in the same period in 2008, up 37%. Small cars comprise over 65% of Maruti?s total sales including exports.
Global auto biggies like Toyota, Volkswagen, Honda and Nissan ? stuck with anemic growth in their recession-hit home markets like US, Europe and Japan??are set to charge headlong into this small car market soon, most in the high-volume, high-margin upper compact segment. And those already present, like Hyundai, Ford and General Motors, too are upping their ante. No wonder Nakanishi feels that 2010 will be the toughest year for Maruti.
Honda will launch its new small car (code name NSC) in 2011 to compete with small cars of Maruti. Similarly, Fiat India would introduce CNG variant of its hatch back Punto at competitive price. Meanwhile, Hyundai is looking at a cheaper variant for its Santro, while Ford plans to bring its compact car Figo at under Rs 4-lakh to beat competition from Fiat?s Punto, Chevrolet UV-A and Skoda Fabia. GM, apart from launching Beat with big pomp and show on the eve of the Auto Expo, may also introduce Spark on an 800 cc platform to compete with Maruti?s largest selling Alto.
True to Nakanishi?s ?get ready to defend the turf? call, executives at Maruti are on a war-footing, scurrying around trying to cover all its flanks, from big ticket capacity expansion, hard line rural marketing, developing an indigenous low-cost car to launching cheaper variants of its existing models.
Low Prices, New Products
?We would offer greater value for money with our new range of cars,? says IV Rao, Maruti Suzuki?s managing executive officer (engineering). The company?s R&D has been working on Alto, WagonR and Swift to maintain the value proposition in the compact car segment, which accounts for 60% of its total sales. Entry-level models Maruti 800 and Omni will also be revamped, but will be positioned for customers in small cities, towns and rural markets according to Rao. The company is planning to introduce refreshed variants of its best-selling cars Alto, Wagon R and Swift that may be cheaper than the existing models. The plan to introduce cheaper variants has been widely anticipated as Maruti will need a competitive product to take on Tata Motor?s Nano as the M-800, its cheapest car at present, will not be sold in the 11 cities that will adopt Bharat-IV emission norms, starting April 1.
Indian engineers of the company are working on a new compact car, which will be based on an existing small car platform. The project will require an investment of Rs 300-400 crore. This will be a completely India-made car. When it rolls out, the new small car will be the eighth small car in Maruti?s stable after M800, Alto, Wagon R, Estilo, A-Star, Ritz and Swift.
With so many models in its hatchback bouquet, the company is also looking to consolidate its platforms??a common architecture for multiple car models that covers design, engineering, production and major components. Auto analysts say the platform consolidation would include phasing out some products that don?t meet emission norms like the M800, replacing others with new generation versions like the new MPV lined up to replace Versa and upgrading other models using common design and components.
A new variant of Alto, in the works, will boost the market leader?s numbers in the sub Rs 3-lakh segment. Maruti had taken a similar step with the re-designed Estilo, which was at least Rs 50,000 cheaper than the outgoing model. Similarly, the new multipurpose vehicle Eeco, priced at Rs 2.59-lakh (ex-showroom Delhi), is Rs 1-lakh cheaper than the Versa. The new Swift petrol could also be cheaper than the cheapest variant currently available. The new variant will sport a 1.2 litre KB series engine against the existing 1.3 litre engine.
To meet competition head on, Maruti is also increasing its manufacturing capacity by 50 % to 1.5-million units in five years.
The company plans to double the annual production capacity at its Manesar plant to 600,000 units, which will entail Rs 1,500-crore of fresh investments. The capacity at the older Gurgaon plant is being increased by 70,000-80,000 units, with an additional investment of Rs 130-crore. The company had expanded the capacity of this plant to 700,000 units earlier.
Though no one at Maruti will share much, there is a big plan to stoke demand too. Brand Centers in major cities are in the offing to showcase the best products from Maruti and Suzuki?s stables. The rural market is also being addressed more sharply now. ?We had to create a need in the villages, then enable them to buy the car and then remove the mental block about how servicing the car was difficult,? Maruti Suzuki India marketing head Mayank Pareek said. In 2007-08, 3-4 % of the total sales came from rural centers. In 2008-09, it went up to 9.5%. Now, it accounts for around 13% of total sales. ?Each segment has multiple products and each product has multiple variants, at every price point and every choice,? adds Pareek. For example, in the A2 segment, which is the largest in India, Maruti has six cars, three in the tall boy (Estilo, Wagon R and Ritz) and three in the regular hatchback segment (A-Star, Swift and Alto). ?First, what we consider is that the brand is top-of-mind for the customer. Next, we see if there are enough options.?
