Company Description Maruti
Suzuki India Limited (MSIL), formerly Maruti Udyog Limited, is a subsidiary of
Suzuki Motor Corporation of Japan. Maruti Suzuki is a leading manufacturer of
passenger vehicles in India. Over the past three decades Maruti Suzuki has
changed the way people in India commute and travel. The company offers 15
brands and over 150 variants ranging from people’s car Maruti 800 to the latest
Life Utility Vehicle, Ertiga. Its portfolio includes Maruti 800, Alto, A-star,
Estilo, WagonR, Ritz, Swift, Swift DZire, SX4, Omni, Eeco, Kizashi, Grand
Vitara, Gypsy and Ertiga.
The 2011-12 fiscal had not been
very attractive in terms of numbers for your company. Was this anticipated
because of the tough economic conditions that prevailed?
The answer will be yes and no. If you ask me, were we
anticipating the decline? Then, yes, but so much? No. In fiscal 2009-10 the
industry grew by 26pc and in 2010-11 it grew by 30pc. If you track the Indian
auto industry, it has never happened that in any year or in any three years
sales continuously increase. If it happens, then the correction happens so we
knew that there will be a less than 26 or 30 pc growth. Both the industry and
SIAM were expecting a 10pc-15pc growth in the industry. Generally this forecast
is done around January and February. We follow the fiscal year pattern. So
let’s say in January-February of 2011 we were forecasting around 10pc to 15pc
growth should happen in the year 2011-12 but it did not happen. The industry finally grew by less than 5 pc.
After we did our forecasting, fundamentally two basic things changed. One was
that fuel prices changed very sharply. The other thing that happened and
equally dramatically was that while petrol prices went up diesel prices did not
go up. So the difference between diesel and petrol prices widened a lot. As a
result the market demand moved from petrol to diesel. No one anticipated that.
There was a big change in favour of diesel.
While our diesel models had a waiting for 6-8 months, the petrol models
had no takers.
Thus, while diesel is growing, in fact last year diesel
grew by 35 pc, petrol declined by 18 pc. So all the manufacturers, including us
were caught clearly unaware. And it was a very ironic situation that while some
of your products are on waiting like 8 to 10 months, some of the petrol cars
are difficult to sell. A third thing that happened was that interest rates went
up. Almost 70 odd pc cars are purchased on loan. If interest rates rise then loans become
expensive and thereby the cars become expensive and people don’t buy them. The
interesting thing here is that almost 60 odd pc customers who buy a car also
have a home loan. Now it’s a double jeopardy. Home loan costs went up so the
home loan EMI went up so many of them postponed their car purchase to settle
their home EMI as the home is the priority. All these 3 things were
unanticipated. Nobody anticipated that the interest rates will go up by
3pc. We can go up by 50 basis points but
not 3 pc. Nobody anticipated that fuel prices would go up so drastically.
Nobody anticipated that diesel will be the favoured fuel. As a result the
projection from the industry of 10 – 15 pc finally realised only 5 pc.
The recently launched Ertiga
seems to be a big hit, unlike the Versa that you launched several years back.
Did you really work hard on this new product?
You can repeat that. We worked very, very hard on the
product. It is a very interesting concept. One of the things about a market
leader is that we have to expand the market. A small player cannot expand the
market. One, the responsibility of a dealer and a big market leader is to
expand the market. Thus, it is very important to create new segments. We meet a
lot of customers, interact with them and observe the trend. We realise that in
today’s scenario there are a lot of customers who would like to have a product
in which they can travel together. Another interesting thing is that now family
sizes are becoming small but today friends are becoming families. For example
if you stay in Vasant Kunj in New Delhi and want to go to the Saket mall and
join a few friends and watch a movie have a drink and come back you will have
to take 2-3 cars. That is not as much as fun as going together. We Indians are
a very warm people and would like to be together. So we realised that the
existing products in this segment were very different. They were either very
big that they can’t be personal cars they can be good as taxis which they are
but they can’t be personal cars so we realised that there is a demand for a car
and the brief we gave to our designers was that we want car which is “small outside but big inside”.
And they were laughing at what we said. How is it possible to make something
that is big inside and small outside? But there was a need for something like
this. And if you see the Ertiga you will find it. The interior space is really
We realised that Indians
want a car that’s got a big boot as well as big space. But we also realised
that 80 pc of the time we don’t use the boot. So we came out with a very
flexible seating system. If you fold the rear seat you will see a 460 litre
boot there. The same way if all are travelling the space for everybody is
enough. We realised that people who sit in the middle seat should have enough
space to move so. The middle seat moves by 240 mm so what it gives the customer
is the flexibility to move back and forth.
I drove this car for one week and the people I showed the car found it
amazing. And we realised also that the customer needs this car in diesel.
Petrol will not be successful. Versa which we had launched that time was only
in petrol and it was ahead of its time. India was not ready for something like
The Ertiga segment will soon be
crowded with cheap SUV offering from many auto majors. Are you ready for this
No, actually in a leadership situation you don’t respond
to competition. You set the agenda for the industry. If you go back to 2005 we
launched Swift and at that time there was nothing called the A2 plus segment.
People said why would you buy this car which is 2 lakh more expensive than the
existing cars and of the same segment but we realised that there is a class of
people for who a car is not just going from Vasant Kunj to Ambience mall. A car
is their statement of life. They want more from the car and today you realise
that the A2 plus segment is the largest segment in this country. All the
manufacturers are coming. Yes, as a leader we create.
Since the purchase of cars is
skewed towards diesel now what are your company’s plans in terms of investing
further in diesel plants?
I think that diesel is a favoured fuel now. So we have
taken some steps. Some are short term steps and some long-term steps. I will
tell you both. At the Suzuki Power Ltd plant
we make diesel engines with a capacity of 2,40,000 vehicles annually.
This has been been increased to 300,000 units per annum. In addition we have
signed an agreement with Fiat India to get 1 lakh engines per year for 3 years
beginning this year. So that takes our capacity to 4 lakhs which is a 63pc
increase. This is substantial. But going forward what we are doing is investing
in our new capacity for diesel. We are
putting up a plant for 3 lakh engines in Gurgaon so the capacity will further
increase. It will be done in two phases. The first phase will be over in 2013.
You are also keeping your
fingers crossed with regards to government policies on fuel?
Fingers crossed on both my hands!
Do you see a change in the
buying patterns of the Indian consumers in the last several years? You brought in the Swift at a time when
nobody could dream of a Swift. You brought in Eritga when nobody could dream of
Ertiga. As a leader do you visualise or do you thrust upon them? How does it
No. we visualise. Actually one thing is true--- anticipate
the change. After the change it looks very obvious and very simple. It looks
like a no-brainer actually. Go back to 2005.
When we launched the Swift we were criticised. Many people thought it
will not sell. We said that we will
launch a car and sell 5,000 vehicles. We said it from day one. People laughed
and said who will buy such an expensive car. We take a lot of time in customer
understanding, I personally meet 100 customers every week. We travel a lot.
Last year I visited 82 cities in India. Literally every second day I was in a
Do you pick your customers
Random is the best sample. We do a lot of organised
research also. It is done in two phases. One is organised research where I hire
a research company and do a focused group. I also believe in direct contact
with the customer to understand the trend etc. In our country trends are
changing very fast. We have a young
population. Around 65pc of people in the country are below 35 years of age.
Around 50 pc of our population was born after 1991. They are exposed to the
best in the world. These trends are changing.
But what is not changing, and this is very important, is the
quintessential Indian definition of value. We still want value. We want more
for less…More for nothing, if possible. You go to the Promenade Mall in New
Delhi’s Vasant Kunj area and you can see cars like the S class, the Jaguar,
Bugatti and Maserati parked outside despite a large parking lot available
inside just to save that 100 parking fees. That’s why our ‘kitna deti hai’ is a very famous commercial. You will notice
that even when housewives go to buy vegetable they will insist on the free
dhania and green chilies as a matter of right. This is our Indian-ness. And
many people ask me why you are so successful in India I tell them perhaps
because we know India better. So coming to your question yes, India is changing
and yes, you need to identify the trend before it happens. Demographic changes
happen very slowly. But when they happen they happen so fast that if you do not
anticipate it you are finished.
And Maruti is good at that?
Let’s be humble. We try. And one thing is we spend a lot
of time with customers, meet customers and understand them.
Coming back to the popular
Swift car, it has overtaken the Alto. Is this an aberration?
It is only this month. Alto will remain by far the largest
There are also a lot of reports
that your company is developing a 1 litre diesel engine for a small car. Is it
As a leader or an automobile player you continue to
develop new products. So we have a natural product plan till 2020. Because product planning takes 4 years, it’s
a continuous process. We will share with you when we launch it.
Is the Maruti 800 being eased
You are telling me this. The Maruti 800 is like Sachin
Tendulkar. In the year 2000 people said Sachin is retiring and this is 2012, he
is still playing. In 2000 people said the Maruti 800 is going, but we are still
selling it. A time will come of course.
Everything has a time and we will call all of you and make an announcement.
You have been so good at
positioning and anticipating. So what happened with the Kizashi?
The Kizashi was not a volume driver and we had said that
at the launch itself. We know that today India is a purely compact car market
but let us say by 2020 or so there will be a demand for bigger cars also. And
as you know we are a big player in a small car market so we wanted to
understand a bigger car . What can we do in the bigger car segment? That’s why
we made a very small entry in this segment with the Kizashi to understand this
customer. However, what happened was that when we came in March 2011, the
market sank. Nobody could predict the timing. Second big thing that happened is
that we import this car. The yen has appreciated and the rupee has depreciated
it. So the overall proposition becomes very expensive. The cars which are there
in this segment also sell around 20-30 units per month. We sell around the
Keeping your falling market
share in mind, the competition and the emergence of villages and rural areas as
potential market, where do you see yourself?
If you see our market share from the year 2000 to 2010 it
has not declined more or less. Last year there was a decline certainly but two
things you must remember that in petrol our marketshare was 55.5pc which by any
stretch you will concede is a good marketshare. In diesel our marketshare was
19pc only because we did not have the capacity to supply. At any no point in
time I had less than 100,000 bookings of Swift and Dzire. So if those cars are
available then the market share will be up. The marketshare should get the
right perspective. Now as far as the rural market is concerned, it’s an
extremely exciting opportunity. Four years back when we started our rural
market campaign only 3.5pc of our sale was coming from the rural market. Now it
has gone to 26pc and growing. And Gandhiji said India lives in the villages. I
agree with that. Rural India is a prosperous India. All this government actions
which have been taken like National Rural Employment Guarantee Act (NREGA) etc.
a lot of money has gone into the rural economy which has given the
results. How does a NREGA guy buy a car?
A NREGA guy does not buy a car. But a NREGA guy buys soaps, detergent, grocery
etc, so the grocery shop owner buys the
car. It’s a linked economy. Only 40 pc in the rural areas are farmers. Around
60 pc are the people who are supporting the rural economy like shop owners,
school teachers, our rural primary health centre people. Thus, 60pc rural
customers are non farmers actually. We are 26pc. Numbers will keep on
increasing I am sure.
How is the used car business
going? Is it continuing to thrive?
year Maruti declined by 11. 2pc overall
for the new cars but used cars increased by 12pc. We sold 2,36,000 used cars
last year. So I tell my team if used cars was a company it would be the 4th
largest car company in India. Maruti,
Hyundai ,Tata Motors and used car business. Our target is to make it half a
million by 2015, i.e. in the next three years.
Everybody is talking about the
exciting XA Alpha concept. Do we see it in some form or other?
We showed a concept car
at the last Auto Expo with the idea to
collect feedback from the customers whether they like it or not and the reasons
behind it. So that research is going on now.
But the actual fact is that 14pc of the car market in India is SUV and
MUV. We came out with Ertiga in the MUV segment and it’s doing well. So let’s
hope an SUV product too should do well some day. As the marketing head I want
it but there are a lot of practical considerations.
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