Entry level diesel cars to take a hit from BS6 implementation by 2020: RC Bhargava

According to the Chairman of Maruti Suzuki, demonetisation is not a worry and sales as well as production are in line with company's expectations

By: | Updated: December 28, 2016 10:38 AM

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Maruti Suzuki has been following an aggressive product strategy lately and more importantly it is trying to change its brand perception. From a company known to make affordable, practical and fuel-efficient cars, the company is transforming itself into a manufacturer of youthful, intelligent and safe cars. Some of the recent launches such as S-Cross, Baleno and Vitara Brezza reflect this change in the company's approach towards product engineering and marketing. The upcoming Ignis pushes this approach a step further with its unconventional design and packaging.

RC Bhargava, Chairman, Maruti Suzuki said "Entry-level diesel cars will witness a huge impact from BS6 implementation by 2020. Making BS6 compliant vehicle involves an additional cost of Rs 1 lakh over the cars running on the existing emission norms.  The price difference between the diesel and their petrol counterparts would be over Rs 2 lakh, thereby reducing the value-for-money quotient."

Clearly, Maruti Suzuki is evolving in terms of brand perception and hence the move to launch Nexa, a premium retail chain for exclusive models. These then are interesting times not just for the company itself but for the car buyers as well, since almost half of the country buys Maruti Suzuki vehicles.

Today, we're meeting up with the company's leadership team to understand what all can we expect in terms of new cars, segments, investment, expansion and a lot more. Please follow this page for live updates from the interaction and shortly, we'll bring you a feature on the company's roadmap. The people we're interacting with today include:

RC Bhargava, Chairman, Maruti Suzuki

Kenichi Ayukawa, Managing Director & CEO

RS Kalsi, Executive Director, Marketing & Sales

CV Raman, Executive Director, Engineering

The recent demonetisation of Rs 500 and Rs 1,000 currency notes had an impact on sales and bookings of new cars. In November 2016, booking dipped by 20 percent, however, cumulative sales of October and November 2016 rose by approximately six percent. Bookings of new vehicles, which is ongoing also witnessed an increase in December 2016 by seven percent. The current trend shows that bookings have gone from -20 percent to +7 percent. That said, True Value, Maruti Suzuki's used car sales outlets across India since used cars purchased through the said outlets can be financed up to 40 percent, with the rest being paid as down payment, however, new cars can be financed by up to 80 percent. The current aim is to have inventory as low as 50,000 units in the company's various storage locations, however, bulk deals have aided in achieving overall company targets.

The company's True Value outlets have also witnessed a downfall as used cars purchased can be financed only up to 40 percent, with the rest being paid as down payment. New cars, on the other hand, can be financed up to 80 percent. The current aim is to have inventory as low as 50,000 units in the company's various storage locations, however, bulk deals have aided in achieving overall company targets. "As of now, demonetisation is not a cause of worry and sales as well as production is in line with company's expectations," said RC Bhargava. Sales in rural areas were also hit due to the demonetisation where there was an 11 percent decline in November 2016, however, in December 2016, sales went up by 16 percent compared to December 2015. The Omni and Eeco achieved the lowest sales due to the demonetisation. In terms of cumulative sales, 30 percent of them come from rural areas while 70 percent contribution is from cities for Maruti Suzuki. According to the company, even in the worst case scenario concerning demonetisation, they will witness overall growth by approximately 10 percent for FY 2016-17. The new Gujarat facility will produce about 10,000 units in the said fiscal year.

In terms of investment, Maruti Suzuki has already put Rs 1,700 crore in the Rohtak R&D facility and will also invest another Rs 2,000 crore by 2019 for new test facilities and test tracks. The air quality index is based on PM 2.5 and 10 in India which is due to dust unlike European countries and the decision on making cleaner cars is not driven by scientific data for the company.

Ride sharing will also see a considerable increase, however, this would not have a negative impact on the industry. Personal vehicle sales may go down but cab sales will go up. The company is working towards this cause and is training about 70,000 personnel presently.

Maruti Suzuki has been a cashless company since 1982 when it had the first investment from Japan. Since then, the organisation has never needed any funding thereby reducing chances of pilferage. As a result, the company's money makers left. The demonetisation drive by the Government can also lead to such results if implemented properly. Low-cost hybrid vehicles are what India needs over the next four years.

Maruti Suzuki is set to introduce the Ignis, Baleno RS, new Swift and new Swift DZire, however, has not officially confirmed the launch dates of the said vehicles.

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