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The Plan C: Maruti’s war to regain its lost market share
Maruti’s market share is under attack from new and old challengers. Can the company prevent it from sliding further downhill?
Issue Date - 15/09/2011
Plan B was implemented around this time last year, when Maruti Suzuki managed a rare feat of sorts. It launched five CNG variants of its top-selling car models – Alto, Estilo, WagonR, Eeco and SX4 – on a single day. As Shinzo Nakanishi, Managing Director and CEO of Maruti Suzuki India (MSI) confided on the occasion, it was the first instance when a car manufacturer had developed and launched factory-fitted, technologically superior CNG engines in India. But there was a deeper reason behind the move. In only the first instance in its 26-year-old history, MSI’s market share had slipped to below 50%, despite the firm posting better-than-expected sales during the April-July period (Q1, FY2010-11). During that period, the market leader sold 2,82,488 cars, which accounted for a 47.68% share in the overall passenger car market (which saw 5,92,405 units being billed to customers; source: SIAM). In the comparable year-ago period, Maruti had a 53.13% share in the 4,40,069 units PC market, with sales of 2,33,811 units. Clearly, the move to launch five CNG models on a single day was aimed towards arresting the slide and drive-up sagging volumes through the offer of alternate fuel vehicles. With rising inflation and fuel prices, the company hoped to bring customers back into the fold, by offering better mileage through its CNG variants.

Better fuel efficiency of its small cars, along with its extensive network of dealers, spares and service centres have long been Maruti’s strong proposition, which has helped it stay ahead of its rivals. That has been probably the biggest reason for Maruti’s majority share of the Indian car market over the past 26 years. However, the company’s grip seems to be slackening on the domestic automobile market, even though it is still by far the market leader by a long shot, with about 40% of the market share in passenger cars. Still, that’s a long way off from its virtual monopoly in the 1980s and over 6o% market share in the 1990s. During the first four months of the current financial year (April-July 2011), the company’s total passenger car sales declined y-o-y by 7.64% to 260,915 units. This came at a time when the overall sales of passenger cars saw a y-o-y rise of 1.12% to touch 598,759 units during the same period. And the latest in the company’s attempt to seal the leak? The refurbished Swift, which, the car maker says, will be 13% more fuel-efficient, built on a longer platform and fitted with a plastic fuel tank. The changes are expected to redefine competition and generate interest among customers who have been going slow on its products in recent months. But Maruti will need more than just a new model to ornament the shelves, to grab the attention of an audience which is fast losing interest in its tunes. Here are some numbers that testify: In July 2010, Maruti’s share of the car market stood at 47.43%. This July, it stood at 39.24%. Even on a cumulative basis, for the first four months of FY2011-12, the carmaker saw its market share PC category fall to 43.58% from a relatively closer to 50% a year back (48.71% to be precise). Maruti may just be finding its hold over the Indian car market growing crippled.

But to be fair to Maruti, it is not the only player to have lost market share in India of late. The #3 player in the category, Tata Motors has also lost some ground this year. Between April and July 2011, its sales fell 21.63% to 68,343 units – denoting a market share of 11.41%, from 14.73% the previous year in the category. It is however the growth of the #2 PV seller Hyundai, which raises eyebrows. During the April-July 2011 period, Hyundai’s share stood at 19.78% – an increase over the 18.89% mark recorded a year back. But true it is – players like Volkswagen, Toyota M&M, Nissan et al, are perhaps more responsible for Maruti’s wishing well drying up.

Market experts claim that the recent launch of models such as the Ford Figo, Chevrolet Beat, Nissan Micra and Toyota Etios are considerably weakening Maruti’s hold on the small car market. Global auto majors like Ford, Toyota, Nissan, GM and VW have launched their own small cars in Maruti’s bread-and-butter small car segment. And it is expected further that the launch of the 800cc Hyundai Eon during the oncoming festive season, will further suffocate Maruti Alto. Today, for almost every model that Maruti has in the compact car segment, there are three or four equally attractive – if not alluring – options to choose from. That’s quite a change from until two decades back, when consumers were all-song about the Maruti 800 – one of the largest-selling cars in the “small car” category. And even when its production was discontinued in early 2010, the likes of Alto, Zen Estilo, WagonR, Swift, A-Star and Ritz continued to rule the consideration set of the Indian middle-class car buyers. No more. Other players like Hyundai, Tata and GM have either successful models or have established their respective offerings in this segment (through aggressive marketing) over the past 12-18 months. The newer, snazzier entrants like Nissan’s Micra, Volkswagen’s Polo, Toyota’s Etios Liva and Ford’s Figo have begun to cast their spell on the younger generation, that is willing to stretch its pocket for the sake of features and brand.

It’s not the recent loss of market share that is Maruti’s biggest worry. In fact, the changing automobile landscape in the country and the radically altered nature of the competition, which is leading to fundamental shifts in car buyers’ preference are the reasons for Maruti executives losing their sleep. Under the circumstances, Maruti Suzuki Chairman R.C. Bhargava’s formula to deal with competition by launching new products that interest the consumer and price them aggressively has been put to severe test. Even as small cars are becoming more popular, car buyers want more quality, comfort and even more power. And car buyers today are more willing than ever to upgrade in line with their rising incomes and aspirations. The shift is helping global car biggies more, as their portfolio is skewed towards higher-end cars and they are able to compete more effectively with Maruti in India.


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