New Delhi: India’s top car maker, Maruti Udyog Ltd, has discounted any threat from the ultra-cheap Rs1 lakh car from the Tata stable expected to be launched next year. However, the company has extended discounts on vehicles, despite squeezing margins, to keep buyers coming.
Responding to queries from its shareholders at the annual general meeting about MUL’s plans in the wake of expected competition from Tata’s Rs1 lakh car, Managing director Jagdish Khattar said the company would continue to focus on its own plans.
“Every company has their own strategy and if we keep on reacting to them, our own strategy will fail,” he said, adding the small car from Tata was more of a threat to two-wheelers.
“We kept on saying in the past, and now even the foreign experts and analysts are saying the same that the Rs1 lakh car will be more of a competition to motorcycle makers. Two wheeler customers who cannot afford our products would be attracted to the small car,” Khattar said.
However, in view of sagging demand for vehicles due to substantial increase in interest rates over the past few months, Maruti, 54.2-percent owned by Japan’s Suzuki Motor Corp, offered discounts on several models including its best-selling Esteem sedan and Alto in August, which helped boost domestic sales by 27% over the same month a year earlier.
Managing director Jagdish Khattar said the discounts would be offered up to 15 September 2007.
“Our sales are good, but at what cost? I don’t know how long I could keep doing this,” Khattar told reporters on the sidelines of a business conference.
Maruti, which has nearly half the Indian market, offered discounts up to Rs30,463 on many of its vehicles last month and ran a similar offer in June.
Khattar said Maruti, which aims to export 50,000 cars in the current fiscal year to March, was hurt by the rising rupee although the appreciating currency also cut costs of imported components.
The company is facing cut-throat competition as many firms are keen to expand market share even if the margins are thin.
Honda Motor Co plans to more than double its dealer network in India and is considering segments such as diesel and alternative fuels for a larger share of the market.
Honda Siel Cars India’s director for marketing, Tatsuya Natsume, told Reuters on Wednesday that for the time being, the company was more keen on growth than boosting profits.
Honda sells City, Civic and Accord saloon cars and the CR-V sport utility in India, while Maruti is launching more premium vehicles in a bid to shift consumers to higher-margin vehicles.
But it will also face new competition at the lower end of the market.
Apart from the Rs1 lakh car that is expected to sell from mid-2008, Renault is studying the feasibility of making a car priced at almost Rs1,25,000.
Toyota Motor Corp may pick India to make a cheap small car within two years, and Volkswagen will soon roll out its compact cars in India from a new plant.
Annual passenger vehicle sales in India are forecast to nearly double to 2 million units by 2010, when Maruti will have a total capacity to make 1 million vehicles annually.
The Maruti AGM approved the change of the company’s name to Maruti Suzuki India Ltd, which will come into effect after it is approved by the Registrar of Companies.