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Maruti Suzuki India Ltd is developing a compact sport-utility vehicle (SUV) that would be based on its popular Baleno hatchback, two people directly aware of the company’s plans said.

Code-named ‘YTB’, the new model is likely to be designed as a coupe or a mini crossover, the people cited above said on condition of anonymity.

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The new model is among a series of SUVs planned by the Suzuki Motor Corp. unit to bolster efforts to regain market share lost to new and established rivals such as Hyundai Motor India Ltd and Kia Motors in India’s fast-growing SUV market. By tapping the existing Baleno platform, Maruti would be able to save on costs and time spent normally on developing a vehicle from scratch.

“Internally, it’s been referred to as the ‘sister car’ of Baleno and companies often take this route to expand their product portfolio quickly. Maruti has already adopted this strategy successfully with XL6 and Ertiga. They definitely need a good number of SUVs in the portfolio to keep increasing their market share in the SUV segment," said one of the two people cited above.

The new model would become the second compact SUV offering for Maruti after Vitara Brezza, which was launched in 2016. Though the car market leader has maintained its dominance in the hatchback and sedan segments there has been a steady increase in customer preference towards SUVs, necessitating the need for Maruti to grow its own portfolio.

In the past year, the company has lost market share in the highly profitable and volume-generating SUV segment to rivals such as Hyundai and Kia due to the lack of new products.

In the compact SUV segment, where Maruti leads with Vitara Brezza, competition has intensified with almost every manufacturer eyeing a pie of this growing market.

In FY20 and the first six months of the current fiscal, Hyundai tipped Maruti as the largest maker of SUVs in India on the back of high demand for its Venue compact SUV and Creta mid-size SUV models.

Some brokerages have been concerned about Maruti’s eroding market share in SUVs. Hence, parent Suzuki has decided to line up multiple products over the next two years to recover lost ground in its biggest market.

Besides the new compact SUV, the Japanese manufacturer is expected to launch the new Jimny, a new mid-size SUV to rival Hyundai’s Creta, as well as two versions of the new generation of Vitara Brezza and a C segment SUV, being developed jointly by Suzuki and Toyota Motor Corp, in the Indian market.

To tap into the increased preference towards cars with SUV-like design, Maruti has also tweaked the design language of some of its hatchbacks such as Ignis and S-Presso to lure customers.

“Despite the improvement in the category mix, however, the company’s UV market share has reduced from 24.9% as of FY20 to 22.9% as of H1FY21. Its chief offerings in the category, i.e. Brezza, Ertiga and XL6 are witnessing intense competition from the likes of Venue, Nexon, Seltos, Creta and Hector. Maruti’s commentary suggests that the demand for passenger cars category is higher vis-à-vis UV (i.e. downtrading) post-covid. This could lead to a double whammy for Maruti’s average selling price and gross margin profile," analysts at ICICI Securities said in a note.

The only way to grow market share in India is to introduce new products, and that is how most of the competitors have gained as well, said the second person cited above.

“It’s been more than four years since Brezza was launched and Maruti needs a new product to cater to a different set of customers who would want a more coupe kind of a design. Tata Nexon does not exactly look like an SUV, but its crossover-like design has managed to attract lots of customers. Also, this car might have a lot of common parts with Baleno, which will make its development cost cheaper than a new product," the person said.

“We cannot give any guidance on product plans," said a Maruti Suzuki spokesperson in response to an email sent on Monday.

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