Maruti Suzuki has achieved 15% of its total monthly sales in volume terms from its premium dealership channel Nexa three years ahead of schedule. The company, which launched Nexa dealerships in 2015 to retail its premium cars, had targeted 15% monthly sales from it by FY20 but has met it in February 2017 itself due to the popularity of the vehicles retailed through it, mainly the premium hatchback Baleno.
In value terms, Nexa’s contribution to the company’s topline during the month would be around 25%.
Since this has come about in February, the contribution of Nexa to total sales in FY17 would be around 10-11%. However, in FY18 on a monthly basis it would be around 15%.
On average, Maruti’s total monthly sales in the domestic market is around 120,000, of which almost 18,000 units are sold through Nexa outlets. Some 10,000 units of Baleno are sold through this new outlet each month. The popularity of the car can be gauged from the fact that it has a wait list period of five to six months though it was launched two years ago. The average price of the Baleno is around R7-8 lakh.
The first car to be retailed via Nexa was the S-Cross, which was followed by the Baleno and the latest to be added is the newly launched Ignis, a premium urban compact car, which is priced at around R5 lakh.
According to RS Kalsi, executive director, marketing and sales, Maruti Suzuki, the cumulative volumes from Nexa has a crossed the 2-lakh-unit mark.
“We have more than 200 Nexa dealerships now and by the end of FY17 it will be 250 across the country. Customers are evolving and what they look forward to is a fully feature-packed vehicle and some premium value. Since finance options are also easily available, more customers think of EMIs and try to move towards premium vehicles,” added Kalsi.
Analysts expect that the contribution from the Nexa to the company’s topline will increase to 28-30% in FY18 once the company has enough capacity.
Since cars like the Baleno are priced higher than entry-level models, the average realisation to the company on per-unit sales is higher than entry-level cars like the Alto and WagonR, which are retailed through the normal dealership channels. Also, since there’s a huge wait list for the Baleno, Maruti does not offer any discounts on it.
The shift in consumer preference and the company’s strategy is visible from the fact that during eight of the 11 months of the current fiscal, there was a decline in sales of the Alto and WagonR.
“MSIL’s new launches targeted toward filling gaps in its portfolio are likely to improve its overall product mix. We estimate MSIL would gain market share further, driven by 14% volumes CAGR over FY16-18E. This, coupled with improvement in mix and reduction in discounts, would drive revenue CAGR of 18% over FY16-18E,” Motilal Oswal in a research note on the company.