Maruti Suzuki looks to revamp dealerships in image makeover bid
New Delhi: Two years after Maruti Suzuki India Ltd introduced the Nexa sales network in an effort to become a premium brand, India’s largest car maker is set to revamp its remaining 1,800 showrooms, 3,000 workshops and as many as 1,000 pre-owned car showrooms under the True Value brand.
It is another effort to change popular perception of the Maruti brand by the auto maker, which will also introduce exclusive service outlets for cars sold through the Nexa network.
Unlike for the Nexa network, where Maruti along with its dealers spent large sums for promoting and building the brand, the investments on revamping the older sales channel will be made solely by the dealers, adding to their costs.
The carmaker is of the view that dealers will ultimately benefit as satisfied customers return to buy Maruti cars.
On average, it takes around Rs1-2 crore to revamp a car showroom in a metro city.
“We started Nexa in 2015. After two years have passed, it seems like customers have accepted this kind of approach,” Kenichi Ayukawa, managing director and chief executive of Maruti Suzuki, told the media on Monday. “Through that we learnt a lot of things. We are trying to spread that kind of experience. We will introduce those kind of things in the existing network...”
He added: “In case of Nexa, some people had hesitation, but as Nexa spread, dealers now expect to set up Nexa themselves as business wise, it makes sense. If the business is not feasible, they will not make investments.”
On average, dealer margins on cars sold through Nexa are higher than those sold through the older network.
Maruti Suzuki’s decision to create a separate sales network in the form of Nexa was prompted by consumers choosing other brands when buying bigger cars as Maruti had traditionally been associated with small cars since it introduced the Maruti 800 in 1983.
The company needed to ramp up its market share in the premium-car category to retain its dominance in the Indian market, where the sales of sedans and sport utility vehicles (SUV) have grown in step with growing incomes and rising aspirations.
Maruti has consistently increased its dominance over the market, especially after its market share fell to an all-time low of 38% following a riot at its Manesar factory that crippled production in 2012.
Maruti Suzuki now commands a 48% market share in the world’s fastest growing car market and is in a better position to protect its turf as competition has weakened in the past few years, even as the auto maker has revamped all its verticals—production, engineering, human resources, cost structures, and now market and sales infrastructure.
Meanwhile, Ayukawa will continue to focus on customer satisfaction to make a 50% market share a reality.
“Target is to improve customer delight. If they are satisfied, they have good feeling, they will return to us and we can get new business for future,” Ayukawa said.
According to Anil Sharma, principal analyst at forecasting firm IHS Markit, Maruti’s move to upgrade its existing channel is “pre-emptive” as the company senses rising demand for its models with more capacity coming in from parent Suzuki Motor Ltd’s Gujarat plant.
Suzuki Motor has a contract manufacturing agreement with Maruti Suzuki.
Secondly, he said, by not investing in Gujarat, Maruti, sitting on cash reserves of around Rs24,000 crore, will find ways to help dealers in buying land and so on.
“They have a huge windfall in terms of cash that they have been sitting on. Too much cash acts as a burden,” Sharma said. “Progressively, it becomes difficult to show profits on that cash, and that gets questioned by the shareholders,” Sharma said.