Maruti signals exit from diesel space; Hyundai gears up to dominate segment

S S Kim, MD & CEO, Hyundai Motor India, at the launch of Hyundai Aura in New Delhi on Tuesday. (Photo: Sanjay K Sharma)
Pricing the Aura at less than Rs 6 lakh, South Korean carmaker Hyundai took a firm step to grab market share in the compact sedan segment, which has so long been ruled by rival Maruti Suzuki. 
With India’s largest carmaker deciding to quit the diesel segment, Hyundai feels it can rule the segment, thanks to its efficient engineering and economy of scale.

From April 1, Bharat Stage (BS)-VI emission norms for automobiles will become mandatory across the country. Passenger vehiclemakers, such as Maruti Suzuki India, Mahindra & Mahindra, Tata Motors, Toyota Kirloskar Motor, Volkswagen India, and Renault India, have announced plans to pull the plug on smaller diesel variants (those powered by 1.2-1.3-litre engines) due to the high cost of transition from BS-IV to BS-VI. 

According to industry estimates, the prices of smaller BS-VI-compliant diesel cars could rise by Rs 1.3 lakh to Rs 1.5 lakh per unit. Most carmakers believe buyers will not loosen purse strings.

“While the prices of BS-VI diesel vehicles will rise, we are trying to ensure this increase will be tolerable. We are trying to reduce the expected burden on consumers by rationalising costs. Our procurement and research and development did an excellent job to control costs. The price of the Aura is a reflection of that initiative and effort,” said S S Kim, chief executive officer and managing director, Hyundai Motor India.

For long, Hyundai has been unable to crack the segment due to Maruti Suzuki’s strong product portfolio. 

According to the data from the industry, the Indo-Japanese carmaker’s product Swift Dzire has a 55 percent market share of the segment. With Maruti opting to quit the diesel segment, Hyundai feels the Aura will provide customers the option to shift from Dzire.

“The overall diesel sales reflect the changes, except that the percentage of sale of diesel in the industry has been sliding. In the first half, it has come down to almost 22 per cent for Maruti, and for the industry overall, it has come down from 38 per cent to 33 per cent,” said Shashank Srivastava, executive director (marketing and sales), Maruti Suzuki.

But Hyundai instead is looking to monopolise the compact diesel car segment, which includes sedans and sport utility vehicles smaller than 4 metres.

“Yes, there is a feeling that diesel may not be popular in the entry-level segment. But there is still a 30-40 per cent market for diesel in the sub-4 metre segment in personal vehicles. That segment is up for grabs because those customers will be looking for a good diesel option. We have been able to develop a 1.2-litre with good emission and full efficiency. Now, the Aura will be the only diesel vehicle in the compact segment,” said Tarun Garg, director (sales and marketing), Hyundai.

However, experts warned that the scope of making money in that segment is extremely limited for automakers, but Hyundai’s economy of scale — thanks to its presence in multiple markets — may give it the edge.

“The market share and profit may not be in tandem for the compact sedan segment because companies find it difficult to maximise profit. However, a global company with volumes and expertise can really make the most of it, if the pricing is correct,” said Kavan Mukhtyar, partner and leader-automotive, PwC India.



Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel