Maruti Suzuki is well on its way to hit one million unit sales in this fiscal. But how does the market leader plan to prepare itself for the rougher road ahead?
Then there is the angle of Volkswagen; which has developed a sudden and heightened interest in the Indian market. After the German auto maker picked up a 20% stake in Suzuki Motor Corporation, it is said to be already influencing key strategy decisions. For instance, speculations are that the company may not renew its agreement with Nissan as the stake sale purchase by Volkswagen is primarily aiming at gaining strength in its India operations. Market watchers believe that German auto maker may not be very comfortable sharing its R&D developments with Nissan and the composition of the deal is going to change; though the company counters it. So Maruti Suzuki would most likely not renew that agreement. It will be interesting to watch how Volkswagen’s entry impacts future strategic decisions.
Going forward, increasing focus on logistics will also help the company bank high volumes in the long-run. Be it the construction of the rail track from its plant to Mundra port or the regional stockyards, which will help shorten the delivery time period, the company is trying its best to gain more efficiencies in all the pillars of its strategy for the Indian market. Analysts believe that with the increasing competition in the hatchback segment, the market leader is expected to lose some of its market share. However, keeping in mind the situation in the early 1990s in the economic liberalisation era; wherein various automakers landed on the Indian turf with bullish plans on the charts, Maruti Suzuki was able to protect its market share and is even today standing tall with a 50% market share. From eight manufacturers and 16 brands in the 90s, the industry today offers 69 brands by 17 manufacturers; but the one key fact unchanged is the leadership position.
However, with players like Toyota and Honda entering the small-car segment by 2011, Maruti Suzuki may have to cede some more of its huge market share. In fact, Nakanishi himself showed some concern with Toyota entering the small-car segment as he said, “I wasn’t worried because they (Toyota) weren’t serious about India so far. But now they are and will soon be coming out with their small car.” But considering the pace at which the Indian market is growing that may not be much cause for concern. It may have taken more than 25 years for Maruti Suzuki to sell more than a million in a fiscal; the race to the next million is expected to be on a highway. The company can even target 2020 as its year to sell two million in a fiscal as the volumes in the domestic market are expected to be double in the coming five years. Also, with the increasing focus on exports, the company may well derive a new slogan – ‘Twenty Twenty Twenty’. However, this time standing on the last Twenty (operating margins) will be a very tough task for Maruti Suzuki, all thanks to the new offerings in the Indian market which are expected to further ignite the price war among the auto makers. Being a leader in a market that continues to grow rapidly; Maruti will have to continue to strive aggressively for new customer acquisition; even if the last 20 takes a backseat.
B&E: What are the reasons according to you have attributed to the company’s mind-boggling growth during the current fiscal?
SS: We are enjoying one of the best growth phases ever as per our calculations; we will be hitting the one-million mark by the 23rd of March this year. This will be the first time that we will cross the on-million mark in a fiscal. The growth mainly came from the overall growth of the industry and as the passenger car industry got bigger we grew with it too. In fact, we never thought at the start of 2009 that we are going to cross one million this fiscal. But we surely discussed reaching the target of one-million unit sales within the 2010 fiscal during a cross-functional meeting in 2004.
B&E: With many automakers launching their hatchbacks, do you believe Maruti will lose its market share?
SS: Frankly, we don’t think so. We have been reading news reports claiming that the company will lose some of its market share as competition increases but internally, we are very much confident of defending our volumes. We have done that before in the 1990s when many players entered the Indian geographies when economic liberalization took place. A lot has been changing inside the company when it comes to the stake that various parties held as well as outside as the scenario changed in the automotive market. At one moment, there were 16 brands with eight manufacturers in Indian; we today have 17 manufacturers with 69 brands. But all the way through we have always kept a 50%+ market share.
B&E: Over the period of time, exports have been rising consistently; can we label it as the next growth path for Maruti Suzuki?
SS: Exports have seen a slow growth but a consistent one. It got a real boost due the scrappage programme that took place amidst a downfall in the overall global industry sales. The deal with Nissan for the A-Star, which it sells under the Pixo badge, also comes into picture. But that’s not all, Maruti Suzuki is taking exports seriously and we expect to grow many folds going forward. In fact, it is interesting to not here that Nissan also sells Pixo in the European market and we sell A-Star in the name of Suzuki Alto in the European markets. Though, there are only minor modifications in both the models, but both of them are very popular among consumers.
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