Home >Markets >Mark To Market >Volume-value conundrum deepens for Maruti
Maruti has popular models in the utility vehicles and premium compact car segment in Brezza and Baleno but competition is catching up. (Photo: Reuters)
Maruti has popular models in the utility vehicles and premium compact car segment in Brezza and Baleno but competition is catching up. (Photo: Reuters)

Volume-value conundrum deepens for Maruti

  • With utility vehicles now constituting sizeable portion of the automobile space and competition intensifying, analysts doubt if Maruti will be able to continue outperform the passenger vehicle industry

MUMBAI: A wide product range and presence in rural, semi-urban areas can help Maruti Suzuki India withstand the current downturn in the automobile industry. But growing competition in the higher-priced, premium vehicles space, notably in the mid-size and utility vehicle segments, can negate these advantages weighing on revenue growth.

Maruti has been losing market share in the fast growing utility vehicle segment, which comprises both sports and multi-utility vehicles. According to Investec Securities Research, the share of utility vehicles in the passenger vehicles segment increased to 39% last fiscal from 34% in FY19 but Maruti’s share dropped from 38% to 33% during the time.

With competition launching new products and many of them receiving good response, analysts fear Maruti may lose more market share in the coming days. “A sneak peek into upcoming model launches indicate that the competition to further intensify and in absence of product introduction by Maruti, it could further lead to decline in market share," analysts at Investec said in a note.

Maruti has popular models in the utility vehicles and premium compact car segment in Brezza and Baleno. But competition is catching up with new products and feature-filled vehicles. “We believe Brezza is likely to face severe volume pressure as both rural and urban customers are preferring XUV300 or Venue respectively with Nexon and EcoSport too holding their forte," analysts at Antique Stock Broking Ltd said in a note. “We see possible deterioration in Baleno franchise from Altroz and upcoming i20 as new Baleno is still 1.5 years away."

With utility vehicles now constituting sizeable portion of the automobile space and competition intensifying, analysts doubt if Maruti will be able to continue outperform the passenger vehicle industry. “We believe Maruti volume is unlikely to outperform the industry due to share loss in rest of the 50% customer segments (utility vehicles and others). We believe increase share of A-segment or entry (level) hatchbacks will lead to revenue growth trailing its volume growth path in the medium-term," adds analysts at Antique Stock Broking.

Mitul Shah, vice president-research, Reliance Securities, believes that product mix may not be superior for most automobile companies this year, especially as people settle for low-end and mid-range models where realisations per vehicle may be lower. But Shah doubts if Maruti will lose share in overall passenger vehicles.

“We expect Maruti to gain share on overall basis. Competitors are definitely better in the mid-size and utility vehicle segments, be it in product features or frequency of launches. But in this pandemic situation people are moving to lower end vehicles where Maruti and Hyundai has wider product range," adds Shah. More clarity will emerge in coming months.

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