All vehicles produced by Maruti Suzuki India Ltd, the country’s largest carmaker, currently sport the Suzuki badge. What the company is deliberating is to carve out Nexa, its premium chain of dealerships, into a separate brand, with vehicles under it possibly sporting a new badge in the future. The company is also evaluating the possibility of a third brand to attract consumers in the 25-35 age bracket, two people directly aware of the developments said, requesting anonymity.
Suzuki and Maruti are discussing the revamped strategy, which they feel is critical for the local unit to maintain its dominance of the Indian market through 2030. If implemented, this could be one of the most significant initiatives of Suzuki in its more than three-decade-long presence in India.
“This strategy will be useful for Maruti Suzuki since they need to evolve as a company to sell 4-5 million vehicles by 2030 and such a step is needed to stay ahead of competition," said the first person cited earlier. “Suzuki may also get some of Toyota’s vehicles in the Nexa brand as part of the collaboration."
A spokesperson for Maruti termed the development “incorrect" in response to emailed queries sent on 7 May.
Toyota and Suzuki have a pact to sell each other’s cars in India. While Suzuki will supply its premium hatchback Baleno and compact sport utility vehicle Vitara Brezza to Toyota, Suzuki will source Toyota’s popular sedan Corolla and sell it through the dealership network of Maruti.
The Nexa chain of dealerships was formed by Maruti in 2015 to sell its premium vehicles such as the Baleno and the S-Cross crossover vehicle. Maruti garnered nearly 20% of its total sales volume in FY19 from Nexa dealerships.
The process of building a separate brand for Nexa would start from 2022-23, when the life cycle of the current products in Nexa would come to an end, said the two people cited earlier. Maruti sells its other models through the Arena network of dealerships.
According to the first person, Maruti Suzuki needs to have a separate brand as it will be difficult to sell at least 4 million vehicles from a single channel.
Globally, companies have followed this structure so that they can attract customers for products at different price points. Toyota has the premium brand Lexus as well as the Daihatsu minicar brand. Nissan sells cars under the Nissan, Datsun and Infiniti brands, while Honda has its namesake as well as the Acura premium brand.
Puneet Gupta, associate director of vehicle forecasting at IHS Markit, said, Indian consumers have shown tremendous confidence and trust in NEXA channel and this has helped Maruti Suzuki move into next orbit of almost 1.9 million cars annually.
“Nexa as a brand can be a master stroke to target premium customers. Consumers are full of aspiration these days and products need to be differentiated not only at the distribution channel, but also from the quality, features and technology perspective," Gupta said. “We feel this is a must strategy in case Maruti Suzuki wants to sustain their market share above 50% in India as a sales group."
The Nexa brand has managed to consolidate Maruti’s position in segments such as premium hatchback and crossover, where customers did not prefer the company’s products earlier.
In FY19, wholesale dispatches of the Baleno rose 11% to 212,330 units, while the S-Cross posted a 22% increase to 37,822 units. Sales of the Ciaz sedan, however, fell 22% to 46,169 units.
The second person cited earlier said that once Nexa was separated as a different brand, the vehicles would share the same platform but have substantial changes in the rest of the structure and this would be quite challenging for Suzuki’s engineering department.
“In companies like Volkswagen, vehicles across the brands share the main platform but have significant changes in the rest of the structure. Suzuki after three or four years may have three brands to cater to different customers," the second person said. “They are talking of a separate brand for young customers since Maruti’s offerings have never been an enticing prospect for young customers as opposed to a Hyundai."