How Maruti raced to No.1 in the ‘SUV’ lane | Mint

How Maruti raced to No.1 in the ‘SUV’ lane

The Jimny, Maruti Suzuki’s sole true blue SUV, was the showstopper at this year’s Auto Expo held in Greater Noida. The car was launched in June 2023.
The Jimny, Maruti Suzuki’s sole true blue SUV, was the showstopper at this year’s Auto Expo held in Greater Noida. The car was launched in June 2023.

Summary

The company, renowned for its small cars, is counting on SUVs to recoup lost ground in the passenger market

New Delhi: A year ago, Maruti Suzuki India Ltd’s share of the Sports Utility Vehicle (SUV) pie was just 9.5%, way thinner than then leader Tata Motor’s 22.6% slice. Indeed, Maruti was then the fifth biggest SUV maker in the country, even trailing South Korea’s Kia, which had entered the market in 2019. However, in the first half of 2023-24, Maruti, long renowned as a maker of frugal, fuel-efficient small cars, nosed ahead of Mahindra to become the largest SUV maker in the country. How did it pull off that stunning feat?

To some extent, the answer, say auto analysts, is marketing. The industry today has a penchant to pass off any vehicle with raised ground clearance as an SUV, and it’s a sin just about every automaker is guilty of, say the industry watchers. Maruti’s dominance, they add, has been inflated by vehicles such as the Fronx, which do not conform to the traditional definition of an SUV. To be sure, Maruti is not alone in this; the same can be said of Tata Motors’ Nexon and Punch; Hyundai’s Creta, Venue and Exter; and Kia’s Sonet and Seltos.

Graphic: Mint
View Full Image
Graphic: Mint

An SUV, by definition, is a large, powerful car with an engine that supplies power to all four wheels. To the uninitiated, most cars around the world are either front- or rear-wheel drive, which means power from the engine is supplied only to two wheels. While that is good enough in most conditions, a vehicle that needs to go off the road needs the engine to power all its wheels. So, even if the front or rear wheels get stuck in mud, slush, sand or a ditch, power from the other wheels can drag the vehicle to safety. That is how an SUV was perceived to be until a decade ago. But the craze for raised vehicles with a commanding view of the road is such that much ambiguity has crept into what exactly defines an SUV.

In the words of Anand Mahindra, the chairman of Mahindra and Mahindra—a company synonymous with off-road vehicles in India, the SUV has become like plastic—forever expanding. “The definition of SUV has become fluid...people are calling cars that don’t have a chassis SUVs.... a car without a chassis is not really an SUV," he rued during the company’s annual general meeting in 2018.

The hunt for 50%

Vehicle definitions aside, Maruti’s transformation from small carmaker to king of SUVs has had many twists and turns over the years.

The company first unrolled a strategy to crack the SUV market more than a decade ago. In 2011-12, its market share in the overall passenger vehicle segment had declined to a record low of 38.3%, triggering alarm bells in Hamamatsu—the home of parent company Suzuki in Japan. The reason for the decline was a sharp uptick in demand for diesel cars on the back of the high cost differential between the two fuels—diesel was then up to 50% cheaper than petrol. The following year, the share of diesel cars shot through the roof to a record 58% of all cars sold in the country.

The Japanese carmaker was relatively weak in diesel powertrains. It only had one 1.3-litre engine, sourced from Fiat, and suffered as a result. Its market share in 2012-13 was still under 40%. As a fuel, diesel lent itself well to SUVs, which began to outpace the overall market on growth. Back then, Maruti had just one niche SUV, the Gypsy, which was powered by a petrol engine.

“We had not misread the market. We had already showcased the XA Alpha concept based on the Swift platform in the 2010 Auto Expo, which would go on to become the Brezza compact SUV," says Shashank Srivastava, senior executive officer, marketing and sales, Maruti Suzuki. “But we did not anticipate the kind of growth SUVs would witness."

By the time Maruti got its first product to the market in mid 2015, others had already launched and the first-mover advantage was gone. The S Cross proved to be a non-starter. It was styled like an urban crossover and not as a traditional SUV, like the Hyundai Creta, which was launched around the same time. “If we had marketed it as an SUV and not as a crossover in 2015, it would have done much better in the market," says Srivastava. “In hindsight, one can say it was ahead of its time and was not the right product to enter in a segment that was still developing."

The launch of the Brezza in March 2016 would help it overcome the S-Cross failure. Though it came a year after the Ford EcoSport, which created the sub-4-metre SUV segment, the Brezza would immediately become the largest selling SUV in the country. This would mark the start of what puritans call the craze for pseudo-SUVs—styled like an SUV, but sans the all-terrain capabilities.

These vehicles were also smaller in size to qualify for the lower excise duties applicable on small cars in India and this meant they could be priced more attractively. Suddenly consumers could buy a vehicle with a raised stance for less than 10 lakh and the market lapped it up. From a share of under 5% in 2016-17, compact SUVs now account for a quarter of all SUVs sold in the country.

Even as the S Cross stuttered and the Creta took command of the mid-size SUV segment—classified as those that are between 4-4.5 metres long—the Brezza gave Maruti more than a foothold in the segment and the company’s overall market-share touched a high 51.2% in 2018-19.

“We were not the largest SUV maker in the country then (Mahindra was) but in the Brezza we had the largest selling SUV brand in the country," Srivastava says.

But Maruti could not rest on its laurels for long as a major obstacle was staring it in the face. With the onset of stricter BS VI emission norms set for April 2020, India had to leapfrog from BS IV to BS VI, and the industry needed to upgrade vehicles in double-quick time. In the new emissions regime, making diesel vehicles compliant was significantly more expensive than their petrol counterparts.

Both the Brezza and S Cross were fitted only with diesel engines, but in 2019, Maruti announced it would phase out its entire diesel portfolio by March 2020. The move sent shock waves through the industry—Maruti had sold 480,000 diesel vehicles in 2018-19, and though the market for diesel vehicles had begun to stagnate at 30%, it was still significant.

“It was bold and I would be lying if I said I wasn’t worried," Srivastava says. “But we are wired to anticipate the future. Today, the share of diesel has shrunk to less than 20% and there are no small diesel cars or even many compact diesel SUVs in the market today."

The shift, however, took a toll on Maruti’s fortunes. In 2020-21, its share in passenger vehicles again slid to less than 50% and, in 2021-22, it declined further to 43.65%. A decade had gone by, and it was back to square one for Maruti.

Teaming up with Toyota

To offset the loss of diesel in its portfolio, Maruti embarked on a twin pronged strategy. One was to double down on CNG, where it had an early-mover advantage but was mostly limited to commercial fleet-oriented vehicles such as the WagonR and Ertiga. Traditional wisdom suggested that more discerning SUV buyers looked for performance, which CNG as a powertrain lacked. CNG vehicles were also not seen as premium enough and the loss of boot space because of the CNG tank was a hindrance as well. Nevertheless, barring the Jimny, Maruti now offers the CNG powertrain across all its SUVs.

With its eyes set on clawing its way back to 50% market share, cracking the SUV segment became a priority for Maruti.

To counter the perception of lack of performance, Maruti got help from an unlikely ally—Suzuki’s long-time rival Toyota. Following a tie-up stitched in Japan between the two global automotive giants in 2017, Maruti and Toyota’s local subsidiary had been selling cross-badged vehicles in the domestic market. This arrangement was extended to the mid-sized Grand Vitara—Toyota sells the same model as the Hyryder. The vehicle was jointly developed by the two firms and is being manufactured at Toyota’s factory in Bengaluru.

Crucially, for Maruti, the Vitara has a strong hybrid powertrain from Toyota, with a separate electric motor powered by a 0.76 Kwh battery pack complementing the 1.5-litre petrol engine. As a result, the car has comparable power, torque and fuel economy as the diesel offerings from rival brands. Unlike the compact SUV segment, where the share of diesel has shrunk to less than 10%, in the mid-size SUV segment that Vitara is a part of, its share is still significant at nearly 20% as of Q1 2023-24.

“No doubt Toyota has given strong product support to Maruti, helping them to easily command a share in the mid-size SUV segment," says Puneet Gupta, director, S&P Global Mobility, an automotive consulting firm.

“It’s a killer combination," adds Avik Chattopadhyay, co-founder, Expereal, a brand and business strategy firm. “You have the best of all worlds in technology, styling, research, supply chain, manufacturing heft and network. Hybrids provide the tech edge for Maruti vis-a-vis diesel."

The era of ‘pseudo’ SUVs

SUVs are manufactured in two ways—‘ladder on frame’, where the body and chassis are built separately, and ‘monocoque’, where, like small cars and sedans, they are built as one unit. M&M is a master of the first kind but most automakers, eager for a piece of the SUV action, innovated with the monocoque frame, where the vehicles are lighter, more fuel efficient and drive like a car.

These vehicles are not large—a quarter of them measure less than 4 metres in length, the benchmark for small cars in India—and only 10% of them have engines powering all four wheels. The rest are not SUVs, going by the textbook definition. Yet, they are a rage in the market and companies are eager to exploit this trend.

“SUVs are associated with ruggedness, versatility and prestige and boost brand awareness to a broader range of consumers," says Ravi Bhatia, president and director, JATO Dynamics Ltd, an automotive intelligence firm. “They also tend to command higher prices, boosting profitability for manufacturers. Positioning a vehicle as an SUV helps it stand out."

“It has been convenient for the industry to not have clarity. There is no way one can call the Punch or Fronx SUVs. But if the Fronx were to be classified as a hatchback or crossover, more than half its appeal is gone," says Chattopadhyay of Expereal. “It keeps the automakers pleased as they can pass off any vehicle that stands a bit tall as an SUV. The Wagon-R, if freshly launched today, would have to be classified as an SUV too, which would be plain ridiculous," he adds.

But if others are doing it, can Maruti be faulted? “Tata, Hyundai and Kia have done it, too, and have reaped success in the past," says Himanshu Singh, research analyst at Prabhudas Lilladher Pvt Ltd, a brokerage firm.

A difficult climb

Achieving pole position in SUVs is one thing. Sustaining it is quite another. In the last two-and-a-half years, the leadership position in SUVs has changed hands multiple times with Hyundai, Tata and Mahindra having each worn the crown before Maruti. So, the question is, will Maruti be able to sustain its reign at the top?

SUVs have only now started to lift Maruti’s overall marketshare, which has crept up from 41% in H1 2022-23 to 42.1% in H1 2023-24. But there is a long way to go. Maruti does have the scope to launch more products and expand its portfolio below the Brezza, to target the newly formed micro-SUV space where the Tata Punch and Hyundai Exter operate, and above the Grand Vitara, to compete with the Jeep Compass and Tata Harrier.

“We need 34% share in SUVs to get to 50% overall share in PVs," says Srivastava. “We will bring in more products to try and achieve that."

But can SUVs help Maruti regain the 50% market share it so covets? “It will be very difficult," says Singh of Prabhudas Lilladher. “The SUV market is very competitive."

Adds Gupta of S&P: “Maruti may remain the leader, but the SUV segment will be split between the top five players."

Catch all the Auto News and Updates on Live Mint. Download The Mint News App to get Daily Market Updates & Live Business News.
more

topics

MINT SPECIALS

Switch to the Mint app for fast and personalized news - Get App