Company Description: Maruti
Suzuki is the largest car maker with over 45 per cent share in India’s
passenger vehicle market. The company currently offers a wide range of
passenger vehicle models in India. The present product portfolio of the company
includes compact cars Maruti 800, world’s largest selling Alto, Alto K10,
Estilo, WagonR, Ritz, A star and Swift, MPV Omni and Eeco, sedans Swift DZire
and SX4 and SUV Gypsy. The company also imports Grand Vitara and premium luxury
sport sedan Suzuki Kizashi, from Suzuki Motor Corporation, Japan. Maruti Suzuki
range of models is available with petrol, diesel, CNG and LPG fuel options.
With over 900 sales outlets and 2900 service workshops, Maruti Suzuki has the
largest sales and service network in India. It is the sole base for producing diesel
engines and the world strategic export model, A-star for Suzuki Motor
Corporation, globally. With two manufacturing facilities and a combined
manufacturing capacity of 10 lakh (1 million) cars a year, Maruti Suzuki
currently produces over 12 lakh (1.2 million) units per annum.
A lot of new players and products are crowding
the passenger cars space in India. So do we see Maruti Suzuki share in the
passenger cars segment coming down in the coming years?
the year 2002 there were just about eight manufacturers and 17 odd brands. Now
we have around 16 manufacturers and more than 100 brands. I am proud to say
that our market share has remained more or less the same during this period,
which is about 45pc. So in the last nine years our market share has remained
the same despite the fact that a number of brands in the market has grown by
more than 7 to 8 times and the number of manufacturers has doubled. We do feel
it is possible to retain the market share. It is going to be very difficult
though and we are very sanguine that we would maintain a similar market
share. But we are also aware than
nowhere in the world has such a high market share been sustained for so long.
The competitive pressures are increasing. The Suzuki DNA is a small car DNA. In
this segment we know we have a big advantage.
Today in the small car hatch segment we have more than 60pc market share. If we
include Omini type of vehicles then our share goes up beyond 70pc.
We have projected that for 2015-16 the small
car market will remain similar and the hatch market will continue to be 60 per
cent of the car market. We believe that this
is a very large market. The entire competition that is coming in the small car
market will throw up challenges for Maruti Suzuki with respect to its market share.
What about products like the Grand Vitara and
the Kizashi, why are they not doing so well like your small car business?
we realise is that while India is a small car market there is definitely a
desire among consumers to have products which are more exciting because the
buyer today is younger. The average age of the consumer has come down from
38-39 to 32 years. These youngsters want more adventurous and sporty cars. Even
if you look at our small cars, the design direction is close to what the consumers
want. The demand for sports vehicles is here to stay. We believe that one thing
that the Maruti brand lacks is that because it is such mass, probably in some
sections it may not be considered an aspirational brand. We have tried to make
it more aspirational for younger people particularly. That does not mean we
shall give up the platform of value. We also have to build in the element of
excitement. We started this with our product
design in Swift. And since then the products we have launched like Ritz, A
star, SX 4 and Dzire they all have the DNA of excitement.
Do also people realise that Maruti Suzuki cars
are also technologically-savvy vehicles?
the brand tracks we do, there is this question of how people perceive us on the
technology front. There was this time
around 1997-98 till around 2003 where our score on technology actually came
down. When Maruti 800 was introduced
about 30 years back at that time compared with the Ambassador and the Premier
Padmini, we were considered technologically superior. But new vehicles came in
from other manufacturers including Hyundai and then on the technology front we
had some problems wherein we could not introduce new models fast because of
various issues. That is why on the technology front we took a beating. Since
then our scores have been improving. The latest score for the last quarter also
indicates that we are doing fairly well on the technology front.
Do you see your customers moving increasingly
towards diesel cars and not really going for petrol cars because of the
disparity in fuel pricing?
our overall portfolio around 20 per cent of our share comes from diesel
cars. We have diesel in four
products—SX4, Dzire, Swift and Ritz. And the diesel percentage in these four
models is almost 70 per cent. It is not
that our diesel volumes are not substantial.
They are about 19-20,000 on an average per month. We are into diesel in
a big way. The question that you are asking is would it grow bigger and what
would Maruti do about this market.
Surely it will grow bigger and the current trend will continue. I will
give you some statistics. In june 2010 the gap between petrol and diesel price
was only 9.80. Today the gap is 23. Now the difference is substantial. The
initial price difference between diesel and petrol is 85,000 in Maruti cars
like Swift etc. But in some models it is slightly higher and running cost
difference is 2.50, so diesel runs at 2 per km, petrol does it in 4.5 per km.
So at 2.50 per km you have to run that count for up to 34,000 km to make good
the initial high investment in diesel vehicle. Now 34,000 km is not much,
because it takes around 2 and half years of driving, especially if you are a
big traveller on the roads. Earlier when the gap was 9-10 this was about 60,000
km so it took 5-6 years, by which time it was time to change the car anyway. So
psychologically even though the economics did not really justify that, diesel
percentage was high anyway. The important thing is that we should have a long
term view from the government on the fuel policy. Suppose we make a huge
investment in diesel facility and tomorrow if excise duty on the vehicle is
increased and the price of diesel vehicles also increases, these diesel
vehicles may not be popular, because it will take several years to recoup the
initial cost. So in the absence of any long-term projections by the government
it is difficult for manufacturers to plan capacity. I think we require a clear
direction from the government on what the auto fuel policy would be. In absence
of that the market would be unpredictable.
Coming to Indo-EU trade agreement, would it lead
cheaper imports in the country for some players?
think surely it can’t be skewed for very long as it’s not possible for this
thing to happen only in Europe and not with other places and my belief is that,
where ever there is too much skew, it does not continue for very long.
The top-end manufacturers
often fight over the youth factor in their sales? Does Maruti have to worry
about such things or is it too large a company which is loved by the youth and
all across different ages?
think it is a real factor in the Indian economy and it is true for any growing
economy that has a demographic profile like India. You know the average age for
an Indian today is 24.5 years which is second youngest after South Africa. This
young population is quite different and these people are more into
experimenting ....they want the latest in design and their thinking is quite
different. Maruti has been somehow associated with more conservative values.
Probably that is the reason why it’s not that aspirational to younger people.
We would definitely like Maruti to be aspirational. The proportion of the
younger buyers is increasing and the average age has come down. In fact we have
been taking actions in three areas for appealing to the youth and to the values
the youth signify. One is product. The design of our products now take into
account the more exciting, sporty, edgy sort of thing, the one you see in
A-star, Ritz, SX4 and Swift which started a new revolution in the upper hatch
segment. These have been done keeping in mind the young buyers. The second area
that we have worked is communication....the type, the tone of our communication
to our consumers. The use of media especially digital media is important. The
young buyers use social media. We have been using it extensively for our
campaigns today. Third is our interaction with our consumers. Our dealerships
and our networks and the infrastructure of the dealership need to be in line
with the taste of the modern times. The young buyer of today is exposed to much
more of retail experience. In our times there was no great retail experience,
even the choice of goods was limited but today you buy vegetables from air
conditioned malls. It’s not about high-end products it’s also about items of
daily use. It is something Maruti can’t ignore even if we have products across
all categories. Some things like value for money and reliability, which Maruti
signifies, are not going to go away. The cost of ownership even for young
buyers is very important but it is the image part that we need to work on.
Does the communication change as you go into the
interiors of India?
in rural areas where our sales are 20pc, there even car buyers don’t read newspapers
many times. No point in advertising in newspapers and channels or even on
social media because many don’t have an internet connection. There it is more
of local selling so communication is not only through mass media, it is also
through personal selling. We make sure that in rural areas we have one sales
executive of a dealer who is of local region. You can’t put a person from a
city to a rural place. If we did that people would not trust, because they are
wary of large showrooms and unknown people. You
have to have the trust factor much more that is why there is a local person. We
have to have a RRSES- regional rural sales executive in every district and he
has to be a local guy.
But you also train them?
For example in some places there are large cash purchases because the farmers
buy when they sell their crop. Therefore they will buy only in the harvest
season. So your efforts in harvest -time is different from non harvest time. So
those are the other things that you have to take care of. I have seen companies
doing ads in languages which are not local, thus that does not make sense. The
good thing is that once you have trust, if one person buys from the same brand
it is likely the other person will also buy from the same brand. In that sense
we have a first mover’s advantage and I think it will stay with us for a very
Are the rising fuel prices, interest rates and
input costs a dampener to auto sales?
Absolutely, no doubt! The two industries of real estate
and auto are the big ticket items that consumers buy in their lives. So if you
ask me the biggest purchase I ever made is my house, the second biggest
purchase I ever made is the car. These are the two for which you have to take a
loan. In case of auto, 70pc of our purchases is by finance and any change of
interest rate is going to change the economy for a person running a household.
So even if the house rate goes up and the car rate does not, it will still
affect the car sales because a larger portion of his income is going to house
EMI, the remaining balance is much lesser for car purchase.
So there is a direct co-relation?
It’s almost a direct co-relation. Thus, if greater EMIs
flow into home loans and even if you have same EMI for auto loans, it is going
to affect you negatively. Inflation is very bad for our industry because the
sentiments are quite related to inflation, business profitability is related.
Also input costs, where generally commodity prices go up and there is buoyancy
in our economy. So the buoyancy brings in higher commodity prices and pushes
down the profitability and to overcome this you need to increase prices and we
have done in January and April like all manufacturers. Once that happens there
comes a point when the value equation changes for the consumers. So you can’t
increase the prices indefinitely at some point of time and that time has
happened in the last six months. Due to fuel price hike, high interest rates,
there is a low sentiment. Today the market situation is not that buoyant and we
find it difficult as we have high inventory at dealerships.
Yet the company is on an expansion mode, your
new plants are coming up, also there were reports that the MD of Maruti was in
Gujarat to look for a new place. So what are the plans ahead?
In the long term we are extremely bullish, our projection
is that by 2015-16 the market should be anywhere from 4.2 to 4.5 million units.
This long term projection is based on 7-8 different methods. It is not as if we
are just going by the past strength. We have observed how other markets have
grown in similar sort of phase and their economic growth cycle. Japan, Korea,
China, Mexico, Brazil, Poland and Russia follow the same pattern roughly in
terms of correlation in per capita income around 1,500 dollars or so, is the
time in real terms when suddenly there is a increase in motorisation. The
second method that we follow is that our penetration is only ten cars per
thousand people, so the scope is much higher, as compared to Japan or US where
it is 600 or 700 per thousand. The scope of upside is very much there. We have
related with income level growths in various segments like middle income or
upper income group so on. All pointers are that the market would double in roughly
five years and we believe in that and that is how investment plans are looked
at. You could have short term blips like the ones we are witnessing once in a
Are you bullish about export markets or is it
the domestic market that is better?
I think India is still evolving as an export
nation. Last year our exports from India
were less than the previous year, but that is dependent totally on the
countries that we export. In Europe there was a big drop in export last year
because the European economy was coming out of real bad times. In the previous
year we sold about 147,000 units out of which 120,000 units were sold to
Europe. But last year Europe sales were roughly half of previous year and we
made up a lot by selling in non-European countries. The export front on the
future would also depend on our policies and acceptance of our vehicle. In
abroad there is not so much growth. The thing is that we must find markets where there is
good growth. Of course in developed markets even if there is no growth it still
constitutes a large share.
You have been with Maruti for quite some time.
How has your experience been with Maruti?
Immediately after my
MBA, i joined Maruti Suzuki- almost 20 years time. At that time the market was
very small. I remember discussing that we should do 90,000 units in a year. It
was a tight market and there was a waiting period for most of our models. There
was very little choice for consumers, there were long waiting periods and
market volumes were very low. There was no competition. Once we had
liberalisation there was sudden change and volumes went up, competition
increased and the waiting period dropped. Suddenly
you had to look at quality of operations much more closely and I have seen this
change and I think it is a great change for the Indian economy, for the
industry and I have enjoyed this journey. Sometimes when I look back, I see a
dramatic change and something that the new generation can’t imagine. But I
think it has been a great experience for me and I also believe that this
competition has brought in a huge change in the Indian industry and has given
it an edge that will help us develop into a great manufacturing base for