BackMaruti Suzuki set to increase lead over Hyundai
Starting with the Ciaz sedan, the auto maker is seeking to replicate in other vehicle segments the success it has forged in the small-car market
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Mumbai: India’s top car maker Maruti Suzuki India Ltd is set to widen its lead over closest rival Hyundai Motor India Ltd and improve its market share as it prepares to launch a slew of new models.
Maruti Suzuki, the Indian unit of Suzuki Motor Corp. of Japan, sells 85,000-90,000 units on average every month; Hyundai sells 30,000-36,000 units—one-third of Maruti’s monthly sales by volume.
The gap is set to widen further as Maruti prepares to launch at least four new models to take on the competition, starting with the mid-range sedan Ciaz, on Monday, seeking to replicate in other vehicle segments the success it has forged in the small-car market.
In the works are a sport utility vehicle (SUV), a compact SUV based on the XA Alpha platform and the SX4 Cross—a cross-over vehicle based on the company’s SX4 sedan, which will be phased out after the Ciaz’s launch. Maruti also plans to introduce new-generation variants of the Swift, the Swift DZire and the Alto in the next 17 months.
Some of the volume gains Maruti hopes to notch up may be offset by lower sales in the small-car market, traditionally the company’s preserve, said analysts.
“The next real product for us will be the SUV," said R.C. Bhargava, chairman of Maruti Suzuki. “Whatever we get from there (from the SUV segment) will be over and above our current market share."
The SUV segment, he said, accounted for 29% of the overall market for passenger vehicles last year.
The segment, for long the stronghold of Mahindra and Mahindra Ltd, has lately seen newer entrants such as Renault India Pvt. Ltd’s Duster and Ford India Pvt. Ltd’s Ecosport capture a sizeable market share. A total of 220,254 SUVs were sold in the first five months of the current fiscal, up 9.4% from a year ago, according to the Society of Indian Automobile Manufacturers (Siam), a lobby group.
Maruti plans to introduce the SUV later this financial year and the compact SUV in the next, said Bhargava.
A stronger product pipeline will sharpen Maruti’s competitive edge, according to analysts.
“Compared to its key rivals—Honda Cars India Ltd and Hyundai Motor India Ltd—who are through with critical product launches and unlikely to launch new products in the next couple of years, except maybe one each, Maruti’s product pipeline is full with new launches," said Joseph George, an analyst at domestic brokerage IIFL Ltd.
The only constraint for the company, said George, could be in terms of production capacity. If the construction of the company’s Gujarat plant is delayed by snags in securing the approval of minority shareholders, Maruti may find it difficult to meet demand.
Maruti will seek the approval of minority shareholders in October to enter a deal with Suzuki Motor Gujarat, a subsidiary of its Japanese parent that plans to build a plant in the western state. Maruti will buy cars from the subsidiary, according to a plan announced in January that raised the hackles of investors and proxy advisory firms, prompting the vote.
Some analysts are concerned about the company losing ground in the volume-spinning entry-level segment in which it sells the WagonR and Alto models.
“This is the immediate threat for the company. These models are old and the replacement strategy is not clear," said Mahantesh Sabarad, deputy head of research at SBICAP Securities Ltd.
Even Maruti’s effort to offer a higher-capacity engine model—the Alto K10—has not paid off, Sabarad said. “They are optimistic of gains in the higher segment, but what about the sales performance of their bread and butter models?"
Combined sales of the WagonR and the Alto dropped 1.3% to 204,335 units in the first six months of the current financial year, according to the company.
In the five months from April, Maruti sold 459,040 units—an increase of 15.7% from a year ago, outpacing the broader market that expanded just 4.6%, according to Siam. Its market share rose to 44.62% from 40.27% a year ago in the same period.
Expectations of a turnaround in economic growth, which slumped to sub-5% levels for two consecutive years, and improving consumer sentiment have helped auto sales turn the corner since May. Maruti’s sales were also helped by the Celerio—a small car with automated manual transmission it launched in February, replacing the Zen Estilo and the A-Star.
Riding the festive fervour, the company launched the Ciaz sedan on Monday in Delhi with the petrol variant priced in the range of ₹ 6.99 lakh to ₹ 9.34 lakh. The diesel model is priced in the range of ₹ 8.04 lakh to ₹ 9.2 lakh. All prices are ex-showroom, Delhi.
Maruti has received over 10,000 bookings for the car it has pitted against the Honda City and Hyundai’s Verna. In the first year, it’s targeting sales of 60,000-80,000 units, managing director and chief executive officer Kenichi Ayukawa said at the launch in Delhi.
Tata Securities Institutional Research’s analyst Umesh Karne wrote in a note that Maruti’s sales will increase 13% to 1.3 million units in fiscal year 2015 and 15% to 1.5 million units in 2015-16, backed by economic revival and new product launches.
Amrit Raj in New Delhi contributed to this story.
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