New Delhi: Maruti Suzuki India Ltd , the country’s biggest car maker, plans to enter the fast-growing sport utility vehicle (SUV) segment at a time when increasing competition in its focus area—small cars—is eating into market share.

The company will showcase a concept for an SUV in January at the Auto Expo in Delhi, a senior executive said.

“The segment has grown significantly in the past few years and we want to have a presence there," said the executive, who did not want to be identified. “It will take at least two years for the model to be production-ready. The details regarding engine and other specifications will be worked out soon."

A file photo of a Maruti Suzuki plant

Around 7-8% of the 2.5 million passenger vehicles sold in India are SUVs, according to the Society of Indian Automobile Manufacturers (Siam). Companies such as Mahindra and Mahindra Ltd and Tata Motors Ltd dominate the segment, which is expected to double its share of the passenger vehicle pie over the next decade.

“SUVs are bound to grow as income levels go up. We will see more and more proliferation of such kind of vehicles in the market," said Mahantesh Sabarad, senior vice president, equity research, Fortune Equity Brokers (India) Ltd. “SUVs are forming a larger chunk of the market. It will account for 15% of the total market in the next 10 years."

Maruti Suzuki, which primarily sells small cars such as the Alto, the Swift and the WagonR, has seen its passenger vehicle marketshare drop to 40% in this fiscal from 45% in last fiscal as more auto makers have entered the small-car segment.

The company has started expanding its portfolio in a bid to regain marketshare. This year, it launched the Kizashi, a premium sedan, which competes with the likes of Toyota Motor Corp.’s Camry and Honda Motor Co. Ltd’s Accord. It also imports the Grand Vitara, a premium SUV from its parent company, Japan’s Suzuki Motor Corp., on demand.

The first Maruti executive cited above said the production model of the RIII—a multi-purpose vehicle (MPV) showcased at the 2008 Delhi auto expo—will also be unveiled at the upcoming expo. The car will hit the roads early next year and compete with models such as the Toyota Innova and Chevrolet Tavera. While SUVs have a chassis-mounted design, which means the cabin is higher than chassis level, the cabin of MPVs is slightly lower. MPVs, however, have a greater seating capacity than SUVs. Together, the two utility vehicle segments account for 21% of passenger car sales in India, according to Siam.

The first Maruti executive said the company has not decided if it will develop the planned SUV on its own or take help from Suzuki. “But it will be developed in India," the executive said.

Sabarad of Fortune Equity said Maruti Suzuki will need to do its homework before approaching the SUV market.

“It’s going to be tough ride for the company as it does not have a diesel engine. It should look to develop its own diesel engine in the future," Sabarad said. “Another thing that the company needs to keep in mind is a good suspension. SUV suspensions are what make or break a vehicle."

Neither Maruti Suzuki nor Suzuki Motor Corp has a diesel engine of its own. Suzuki has a tie up with Italy’s Fiat SpA for diesel engines. The Italian company provides the 1.3-litre multijet diesel engine that powers Maruti’s Ritz, Swift and DZire models. In July this year, Suzuki also agreed to buy a 1.6-litre diesel engine from Fiat’s powertrain unit to install in a car it will build in Hungary in 2013. The Japanese auto maker has been buying 2-litre diesel engines from Fiat Powertrain Technologies since 2006 for the SX4 made in Hungary.

Maruti Suzuki has’t taken a decision on developing a diesel engine due to lack of clarity on the government policy over deregulation of the fuel’s price, chairman R.C. Bhargava had said earlier. “We don’t know the government’s stand on diesel pricing," Bhargava said. “We will have to act accordingly."