Maruti Suzuki’s dreams to firmly plant the brand in the premium car market may not turn into reality just yet. Less than two years after it made its debut in the executive segment with Kizashi, its prices have been slashed by 30%, or R5 lakh, to R11.52 lakh (ex-showroom, Delhi), industry sources said. ?The prices of the Kizashi have been reduced by R5 lakh at least till the end of the month. The deal may continue till next month depending on stocks,? a Delhi-based dealer said.
Another dealer with multiple outlets added that Kizashi only accounted for 3-4 unit sales in a month. While lack of a premium brand hurt Maruti, a big reason for slow sales of the Kizashi could also be the lack of a diesel engine.
Imported as a fully-built car from Japan with a starting price of R16.52 lakh, the Kizashi had hoped to compete with premium-end cars, such as Honda Accord and Toyota Camry, but beat them with a price positioning closer to the executive segment below (Honda Civic and Toyota Corolla). However, the new prices pits it against models even below the executive segment, such as the top end Honda City, or Hyundai Verna. There was also a plan to later assemble the car in India, but this was dropped because of flagging sales, which have dipped 80% to 35 units in the first half of this fiscal.
For the car market leader, which has a 47% share in the small car/hatchback mass market, making inroads into the premium segments had been an important growth strategy in line with the growth in demand for such cars.
Deepesh Rathore, MD at IHS Automotive India, said such a sharp price reduction might hurt the brand image. ?The premium segment is about brand image and helps pull customers to showroom who may walk away with a smaller car. The Suzuki management aspires to be better in the premium segments, which is a higher margin business,? he said.
Maruti’s other premium model, the R23-lakh Grand Vitara SUV, does not do well largely because it offers only a petrol engine option in a diesel-dominated segment. Sales for the mid-size SX4 sedan also fell 71% to 2,861 units in the first half of FY13, with buyers in the segment opting for cars, such as the newer Hyundai Verna and Nissan Sunny, or aspirational brands, such as the Honda City, Skoda Rapid and Volkswagen Vento.
While a straight jump to the premium segment with the Kizashi may not have worked, the move up the ladder is happening, though at a slower pace. The premium push has begun with new models, such as the seven-seater Ertiga MPV, which is expected to be will be followed by a compact SUV sometime in 2013-14.
Maruti’s closest rival, Hyundai, has also followed a similar strategy of moving up the value chain. Apart from the Eon compact, Hyundai’s other recent launches such as the Sante Fe, new Verna, Sonata and Elantra, have all been towards the premium market. Mahindra is also doing the same with the XUV500 and Ssangyong Rexton.