Maruti Suzuki moves up the gears, plans to become an aspirational brand

The company that sells one in every two passenger vehicles in the country says the strategy it has followed over the past few years is beginning to pay off
In January this year, the country’s largest carmaker, Maruti Suzuki, reported a 0.6 per cent drop in domestic car sales, down to 139,002 units from 139,844 units exactly a year ago. In the small car segment (mini plus compact) — its traditional workhorse — sales were down 7.4 per cent. The sales of A-segment (entry level) mini cars (Alto, S-Presso) slid 2.8 per cent, down to 25,153 units from 25,885 units in January 2020.

Sales of some other popular models such as the WagonR, Swift, Dzire, Baleno, Ignis and Celerio that operate in the compact segment also plunged in January 2021, accounting for 76,935 units and representing a de-growth of 8.8 per cent against 84,340 units sold in January 2020.

Now consider its closest competitor, Hyundai Motor India. The Indian subsidiary of the Korean chaebol registered a 24 per cent growth in January 2021 sales, with its domestic numbers at 52,005 units against 42,002 units in January 2020. Most of the growth came from models such as the second-generation Hyundai Creta SUV and the latest i20 hatchback, both of which drew buyers back to its showrooms in large numbers.

So what explains the easy calm at Maruti Suzuki despite this poor showing?

For one, this is just part of the plan. The company that sells one in every two passenger vehicles in the country says the strategy it has followed over the past few years is beginning to pay off. “Our efforts to strengthen the portfolio with newer models and improved design, to take bold decisions to introduce products in new segments such as premium hatch, compact SUVs or even multipurpose vehicles, to expand the network with the launch of ‘experience’ channel like Nexa, and the early entry into CNG have evolved along with evolution of the market and the consumer,” said Shashank Srivastava, executive director for marketing and sales at Maruti Suzuki India Ltd. “If in our early days we cultivated the image of being a value brand, now, since the car owning consumer is younger and aspiration-driven, we realise we have to cater to that segment also where buying criteria can be different from the traditional one.”

Srivastava added that Maruti Suzuki has always led the passenger vehicle market by a long chalk, but it is only in the last three years that it has been able to notch up a market share of 50 per cent-plus. “If we look at the last 20 years, we were between 38 and 45 per cent of the market. But in the last three years, we have taken more than 50 per cent of the market. That’s proof that our eye is on the ball.”

For another, sales in some key segments have zoomed beyond expectation. Take the Ciaz compact sedan. Growing at 61.3 per cent in January 2021 over January 2020, it logged 1,347 units (many observers attribute this to a low base of 835 units last year).

Now move to the utility vehicle (UV) segment. The performance of Vitara Brezza, S-Cross, Ertiga and XL6 together has also been spectacular — sales surged 45.1 per cent at 23,887 units in January 2021 against 16,460 units (again, on a low base) sold in the same month last year. (Surprisingly, the sales of the Eeco van took a dip of 5.2 per cent in January, selling 11,680 units compared to 12,324 units in January 2020).

Maruti isn’t saying it has taken its attention off its bread and butter segment — the top three sellers for the company last month were the Alto (18,260 units), Swift (17,180 units), and the WagonR (17,165 units); it’s just that the carmaker now wants to be counted among the country’s “aspirational” automobile brands. To that end, it has worked hard on design tweaks and technological upgrades in its models, besides overhauling its retail network in a big way.

While design upgrades and feature tweaks are de rigueur in the automobile business, Maruti Suzuki has put a lot of thinking and money into the second area over the last five years or so. Realising that car retailing had moved beyond just selling a four-wheeler to “forging a relationship”, Maruti Suzuki had, in 2015, launched the Nexa channel “to provide a more premium car-buying and servicing network to prospective customers and Maruti owners”. The company says the Nexa channel has helped attract customers who might not have previously considered a Maruti. The channel has sold more than 13,00,000 units over five years. The contribution of Nexa to Maruti Suzuki’s sales has gone up from 5 per cent in 2015 to 19 per cent in 2020-21.

“If you look at the Nexa as a standalone auto brand, it would be the third-largest in India after Maruti (51 per cent) and Hyundai (17 per cent),” said Srivastava.

Maruti Suzuki has also reconfigured its regular channel, upgrading the customer interface and overall ambience in Arena outlets, the name for the showrooms for other brands. “We realise the expectation of the customer even from our regular channel has gone up. So we strengthened the Arena channel in terms of design, service, selling — basically the whole experience,” Srivastava said.

When launched, Nexa showcased only the S-Cross in its showrooms; now it also offers the Ciaz, Ignis, Baleno and the XL6, while the other brands in its portfolio are offered through the Arena network, which contributes the larger 80-81 per cent of the automaker’s retail sales.

So what do the next two years look like? Srivastava wouldn’t go into specifics. “While the SUV segment has grown tremendously in the last few years, this is the segment where we have lagged in recent months. While we are the market leader in compact SUVs (Brezza), overall, this is a segment where we can do better. So we have to study this segment closely and evolve our strategy,” he said.

Indeed, Maruti Suzuki’s performance here has been a cause for worry, if nothing else for the fact that the new generation Hyundai Creta has been topping the SUV charts month on month since its launch in March 2020. The Creta turned out to be the bestseller in 2020 with 96,989 units, followed by the Kia Seltos at 96,932 units. Maruti Suzuki Vitara Brezza, which led the compact-SUV segment for quite a while, stood at 83,666 units last year, a sharp drop of 34.2 per cent compared to 2019, when it logged 127,094 units.

This, then, would be the space to watch for some aggressive muscle flexing. As the company’s management said in a recent quarterly earnings call: “We are watching white and blue spaces (in the SUV segment) and will try to see if they can increase volumes by introducing new vehicles in that space.”

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