AD times come without any warning. That was undoubtedly the biggest learning for India?s automotive industry last year, and especially for India’s biggest car maker Maruti Suzuki India. Prior to 2011, the company had seen two years of sustained growth. Volumes rose as Maruti Suzuki crossed the 1-million car mark in 2010-11. For 2011-12, the passenger vehicle players had set a growth target of 14% but managed a dismal 4.55%, according to the data released by Society of Indian Automobile Manufacturers (SIAM). For Maruti, it was a double whammy as a crippling labour strike in June at its Manesar plant hit production whose ripples could be felt till November.
A sudden spurt in demand for diesel engines in the passenger vehicles space also caught many big players, including Maruti, unaware. With the waiting period for the diesel variant of a Maruti car ? Swift, Dzire, SX4 and Ritz ? four months at least, there was no way that Maruti could meet this demand in the prevailing circumstances. High fuel prices and skyrocketing interest rates also had a dampening effect on the market, where 70% of retail sales are financed through car loans.
?Business sentiment was just not good. Unfortunately, we ended the last financial year with 11% negative growth. It was a tough year for the entire industry,? says Shashank Srivastava, chief general manager ? marketing, Maruti Suzuki.
The tide changed only in the last quarter as sales picked up across brands and an expected cut in interest rates on loans further fueled hope that change was in the offing. In fact, Maruti Suzuki sold around 3,21,000 vehicles in January-March 2012 ? the highest in the company’s history.
Srivastava knew this was his chance. So Ertiga, Maruti’s answer to the multi-purpose vehicle, was unveiled at the Auto Expo in January 2012, followed by its commercial launch this April across the country.
A foray into unchartered territory was essential if Maruti had to gain back the market share it had lost over the years. In the past few years, rival companies including Hyundai, Skoda, Chevrolet, Volkswagen and Honda have made a dent, if not gained leadership status, in the Indian market with star products in entry level and premium hatches segments previously ruled by Maruti Suzuki with its Maruti 800, Alto, A-Star and WagonR in the mini sub-segment and Swift, Estilo and Ritz in the compact sub-segment.
While entry level hatches comprise 42% of the overall passenger vehicles pie in India, the share of bigger hatches is 19%, and that of passenger utility vehicles is 15%. The passenger utility vehicle is again divided into two categories: MPV (multi-purpose vehicle) and compact SUV (sports utility vehicle) or SUV. While car buyers have limited options in the first category?Toyota Innova, Chevrolet Tavera, Mahindra Xylo and now Ertiga, the SUV sub-segment has a whole range of high-end attractive options such as Mahindra?s XUV500, Chevrolet Captiva, Ford Endeavour, Mitsubishi Outlander, Porsche Cayenne, Mitsubishi Pajero, Honda CR-V, and Audi Q7, among others. Success in the MPV vehicle sub-segment was therefore a necessity. With this target, Maruti displayed a concept car named R-3 at the Auto Expo 2010 in New Delhi. Consumer feedback gathered from there was incorporated and the global unveiling of Ertiga happened early this year at the Auto Expo.
Traditionally, MPVs’ target customers have been businessmen, the self-employed and those with large families, but it is in their commercial vehicle avatar that these have found their niche. Qualis, launched in 2002, achieved instant success as a commercial vehicle even though Toyota positioned it as a family MPV. The vehicle was phased out in 2004. Existing MPVs such as Chevrolet Tavera and Toyota Innova have met similar fates as both find higher recall as commercial vehicles or taxis. Maruti is hoping that Ertiga will buck this trend.
?Ertiga is neither a people?s carrier nor a commercial vehicle. It is a lifestyle vehicle for a socially active individual,? says Srivastava. He further explains how four main findings surfaced when the company conducted a research to spot gaps/limitations in this small sub-segment. ?First, existing vehicles in this category are large and difficult to maneuver because of bigger turning radius. Second, these are usually priced on the higher side (R8 lakh onwards). Third, these vehicles are often pigeonholed as commercial options or taxis with less comfort and aesthetics and lastly fuel efficiency is just not good enough,? he says.
Abdul Majeed, partner and leader ? automotive practice, PricewaterhouseCoopers (PwC) believes that the passenger utility vehicle segment will see an impressive uptake in both urban and rural households. ?Cars in this segment will have takers in middle and higher-middle class households in urban India. There will be a surge in demand in rural areas too as people there prefer family carriers more. The biggest challenge for auto players coming up with MPV or SUV in the next two years will be to position their cars to appeal to a variety of target groups and be relevant in a largely small car market,? he says. According to him, value for money will be a concern for all the prospective buyers in this segment.
Targeting young urban couples in the age group of 30-45 years, staying in nuclear or joint family set-ups, Ertiga starts at R5.89 lakh for LXI model and goes up to R8.45 lakh for the top-end ZDI(ex-showroom Delhi) model.
This is not Maruti’s first attempt at coming up with an MPV. In 2001, the company launched its luxury MPV Versa which failed to generate volumes. While the company deals with the pressure of not repeating Versa, the positioning challenge this time is that the category itself needs to be established first. Creative agency Lowe Lintas has been given the mandate to develop the ad campaign for it. So far, advertising in the passenger utility vehicles space in India has been drab and restricted to creatives which show nothing more than close-up shots of the vehicle.
Says Amer Jaleel, national creative director, Lowe Lintas, ?Categories are rarely formed in India. During our research we found that people in the passenger utility vehicle space are looking for offerings which can be a projection of their lifestyles. And that?s how we decided to call Ertiga a life utility vehicle or LUV. The elegant and contemporary look of the car makes it a replacement for a sedan.?
While the teasers for Ertiga were on air for more than a week after its launch on April 12, the revealer films hit television screens last weekend. Apparently, there has been a deliberate attempt to build intrigue around Ertiga which is a result of the great response Maruti received within a few days after the launch. ?It made sense to do this as a large section of people in India wait for a Maruti Suzuki launch,? adds Jaleel. Though this will be a multi-media campaign, innovations in digital and on-ground will be the things to watch out for.
In an earlier interview with Brandwagon, Srivastava had revealed how the company upped its spends on this year’s Auto Expo by 10%. The trend will continue in terms of the company’s media spends too. Maruti Suzuki?s media spends for this year will be Rs 200 crore approximately. While the company has cut spends on print, digital has gained prominence this year with 9% share of the overall media spends. According to industry sources while Maruti Suzuki spends R15-20 crore on a launch, it will cough up a slightly higher sum for Ertiga’s phased multi-media campaign. Also, this time the company is targeting 55% of the target group with its media burst as against the usual 40%.
Ertiga’s launch is certain to make rival auto-makers sit up. The passenger utility vehicle segment in India remains polarised with high-end options in the sports utility vehicle (SUV) priced upwards of Rs 10 lakh. This may change in the next two years with new launches in SUV and MPV sub-segments from Mahindra & Mahindra (M&M), Nissan, Tata Motors, Renault, Hyundai and Chevrolet, among others. ?The next few launches in the MPV segment are less likely to be game-changers but these will be fillers in the market space to generate sustained volumes,? says VG Ramakrishnan, vice president, automotive and transportation practice, South Asia and Middle East, Frost & Sullivan. ?Two things can happen in case of Ertiga. Either it will become the first or second family car or will witness uptake as a commercial option. Therefore, Maruti will have to be careful with the positioning and abstain from being everything to everybody,? he points out. He goes on to explain how the SUV space is more ?individualistic? when compared to MPVs.
Adds Arun Malhotra, senior VP, sales and customer care, automotive division, M&M, ?The image of passenger utility vehicles is more in the minds of analysts than customers. In the last few years we have observed that 80% of car buyers in this segment are not traditional utility vehicle buyers who are looking for a complete solution package.? M&M manufactures Bolero, Scorpio, Xylo and XUV500. The company sold around 3000 XUV500 and more than 4000 Scorpio last month. And, according to Malhotra, there has been no cannibalizing so far.
Whether Maruti?s strategy has been correct will be known only when the rubber hits the road. It may be recalled how Maruti?s last foray in premium sedan space with Kizashi was a no-show. The sedan is entirely imported and the company has not been able to price it correctly. As Srivastava puts it, the company has embarked on a mammoth task of category creation with Ertiga. On a scale of 1-100, Maruti is 80% sure of the success of Ertiga. Within a week of the launch, the company had received more than 10,000 bookings for the MPV. Not only this, come May and the company will launch the MPV in Indonesia followed by other key Asian markets.
One wonders if the company will be able to sail through on the back of a few star products and new launches this year. ?We are not defined by a single star product but an entire portfolio of star products. Yes, it will be a challenge to sell petrol vehicles now,? says Srivastava.
The company plans to meet the demand for more diesel engines by investing R 2,000 crore in its Gurgaon facility and producing about 1.5-lakh units of the efficient 1.3-litre mulitjet diesel engine. Maruti has also signed a deal with Fiat for procuring an additional one lakh engines per year, for the next three years. 2012 will also be the year of some big changes as the company is all set to come out with the replacement of its popular small car M 800.