Melwin Joy
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Melwin Joy

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Passenger Vehicles Segment: Maruti Suzuki grabs 50% of market

If the recent reports are to be true then Maruti Suzuki has grabbed 50% market share in the passenger vehicles segment for the first time ever in 2017-18, as its utility vehicle sales outpaced that of rivals.

Maruti, India’s biggest carmaker also sold more than 1.5 million units for the first time in its over-three decade history. At 1.65 million, Maruti’s sales were 14% more than the year before, and almost twice the pace of the passenger vehicles industry.

Maruti Suzuki chairman RC Bhargava said the company’s investment in diesel technology when the fuel was much cheaper than petrol, as well as in new models and sales network helped it gain market share.

“The 39% market share in FY13 was not normal at the time (when) the gap between petrol and diesel prices widened to around Rs 32 per litre,” said Bhargava.

“The market shifted to diesel and we did not have enough diesel cars. Since then, we have invested in diesel capacity. The market has normalised. Of course, we have added a lot of new models and have strengthened the distribution network. Nexa has taken off well; Suzuki investing in Gujarat has freed up resources. These decisions were initially met with hesitation, but we understand the market well. It has all paid off.”

While Maruti Suzuki has been the leader in India’s market for passenger cars and vans, it captured the top spot in utility vehicles (UVs) only in fiscal 2018. Despite a late surge by Mahindra & Mahindra helping the long-time leader inch ahead in the March quarter, Maruti Suzuki ended the year with a lead of 25,000 units and a 27% market share, show data released by auto firms in the past few days.

Brand loyalty key strength

Maruti Suzuki’s senior executive director for marketing and sales attributed the stellar performance to the “disruptions” that it undertook over the past three-four years to meet the aspirations of the Indian consumer. “We are listening to customer voices and bundling them (what they demand) in our products and services,” RS Kalsi said.

In the past few years, Kalsi said, the company launched models like the Baleno, Ignis, S-Cross and Vitara Brezza in new segments, as well as introduced new technologies and platforms, and expanded the sales network. The outcome of these were reflected in the sales performance, with volume growing 29.6% in utility vehicles and 28% in compact cars, which he said were the best ever for the company.

VG Ramakrishnan, managing partner at Avanteum Advisors, said General Motors closing its Indian operations, Hyundai Motor’s decision to stop selling the Santro and the dwindling customer preference to the Tata Nano also helped Maruti Suzuki, especially in the small-car space.

Maruti hopes to retain the top spot in utility vehicles in fiscal 2019, as Brezza continues to drive volumes and it plans to launch an all-new Ertiga this year. However, competition will be tough with Mahindra also lining up new launches. “We are bullish on the stock. It is our top pick in the auto space,” said Bharat Gianani, research analyst at Sharekhan by BNP Paribas. “Maruti Suzuki is the only company to have an order backlog right now. They have waiting of 2-4 months for the Baleno, Brezza , Swift and DZire. The product pipeline is strong and we believe they will continue to outperform the industry in FY19.”

“Maruti’s key strength has been its brand loyalty as also their distribution network at ~2,500 vs Toyota’s at just ~365,” analysts at Elara Capital noted in their outlook on April 2. “Maruti has increased its market share by 540 bp (basis points) to 50.1% over FY10-YTDFY18, despite intense competition. We believe with the strength of MSIL’s distribution network, Maruti’s Baleno and Brezza would still remain market leaders in their segments, while Toyota’s re-badged models could garner share from other competitors in that segment.”

In passenger cars, Maruti Suzuki gained 5 percentage points — led by the Baleno and the new DZire — to reach a new peak of 57%. This year, it will be launching the new-generation Wagon R along with a facelift of the Ciaz sedan. In vans, it ended with 81% of the market. Ramakrishnan of Avanteum Advisors, meanwhile, said the massive shift towards greener vehicles in future may pose a challenge for the company.

Source: Economic Times

Melwin Joy
AUTHOR

Melwin Joy

All stories by: Melwin Joy