With the launch of its new sub-compact sports utility vehicle Vitara Brezza, Maruti Suzuki's share in the domestic utility vehicle market has seen a significant jump in the past two months, taking it to its highest level for the company. From a market share of around 15% before the launch, the share has moved to 26% in the segment.
The gain for Maruti has turned into a loss of share for segment market leader M&M, which has seen its share drop from over 41% to less than 35% in a span of three months. Hyundai too has seen its share decline marginally, according to data released by the Society of Indian Automobile Manufacturers.
Analysts expect Maruti to be able to maintain its share at the current level as the newly-launched Brezza has got over 50,000 bookings till end-April, which could mean a run-rate of around 8,000 units for the next six months.
For the year 2015-16, M&M's share in the utility vehicle segment, which includes SUVs, compact and sub-compact SUVs as well as multi-purpose vehicles or MPVs, was at 38%, marginally higher than its share in the previous year.
Maruti and Hyundai had a share of 16% and 11% in 2015-16, respectively.
The year 2015-16 saw a number of significant launches in the compact and sub-compact SUV segment. Hyundai launched the Creta while M&M came out with two models, the TUV300 and KUV100.
Towards the end of the year, Maruti launched the Vitara Brezza and M&M launched its NuvoSport.
The year 2016-17 may witness further increase in competition. Honda has recently launched its compact SUV BR-V and Maruti is expected to launch another sub-compact SUV Ignis in the later part of the year. Hyundai is also expected to launch an SUV Tucson during the year.
The gain in market share in a segment with higher margins is expected to be an overall positive for Maruti, even if it has witnessed sales decline in the entry-level mini segment which contributes to one-third of its volumes. Analysts are now looking at Maruti as an upgrade brand, compared to a previous description of first-time buyers’ choice.
“Maruti has not only credibly maintained its market share over the past few years now, but has in our view earned an upgrade brand status. One key concern with Maruti has always been the perception that it is primarily a first time buyer’s choice, but less of an aspirational brand,” HSBC recently said in a report.
“But with new launches such as Ciaz, Baleno, S-Cross and Vitara Brezza, it has started to attract the attention of upgrade buyers as well. This is a significant achievement and should underscore the long-term strong positioning of Maruti in India,” the HSBC report said.
This shift in product-mix towards models priced at higher price-points which tend to have better margins compared to small cars has also reflected in the latest earnings of the company. Net realisations per unit for Maruti went up 8.1% on year to Rs 4.24 lakh in the January-March period.
Speaking to analysts, Maruti Suzuki management said that the higher net realisation per unit was also due to amount of average discount per unit coming down by around Rs 4,000 from the October-December quarter.
In the October-December period, the discounts had reached an all time high of Rs 21,997.