Maruti Suzuki seeks to shed budget label with premium push

New Delhi: Maruti Suzuki India Ltd, which has a stranglehold on the small-car market in India, is trying to shed the budget car maker tag by selling its more expensive models through a separate network as buyers, even first-timers, opt increasingly for larger cars.

As part of efforts to boost its market share in the premium-car category, Maruti Suzuki in a meeting on Saturday decided to sell its cars through two separate marketing networks and also recast its top management, according to three people familiar with the development. All of them requested anonymity. A spokesperson for Maruti declined to comment on the story.

The decision to create a separate sales network may have been prompted by consumers choosing other brands over Maruti when buying bigger cars as India’s largest car maker has been traditionally associated with small cars since introducing the Maruti 800 in 1983. Maruti Suzuki needs to improve its market share in the premium-car category to retain it dominance in the Indian market, where the sales of sedans and sports utility vehicles (SUV) have grown in step with prosperity and rising aspirations.

“They have been trying to shed the tag of a small-car maker and I think it is a step in the right direction,” said Abdul Majeed, auto practice leader and partner, PricewaterhouseCoopers India. “They have to invest a lot of time and attention in offering a very personalized attention to every customer. To put it simply, they will have to understand the difference between selling a Maruti car and a BMW.”

According to the new plan, while the Maruti DZire compact sedan and cheaper models will be sold through the existing Maruti Suzuki network, premium cars such as the Ciaz sedan, S-Cross SUV, and an yet to be introduced compact SUV will be sold through a new network, named Nexa.

The Nexa network will be rolled out across India’s top 10 cities with the launch of the S-Cross in June. Partho Banerjee, who was responsible for Maruti’s dealer development, has been tasked with developing the Nexa network. An internal communication to this effect was sent to Maruti employees on Saturday.

“Maruti has taken a decisive step in creating a new channel. Now there will be a new channel for a different category of products. There will be new sets of products and customers and the needs of these customers are different,” said a person directly involved with the matter.

To be sure, Maruti’s efforts in the past to strengthen its position in the premium segment met with limited success as its competitors Honda Cars India Ltd and Hyundai Motor India Ltd consolidated their positions as the preferred brands for customers who look to graduate from a small car. Maruti introduced premium sedan Kizashi and SUV Grand Vitara to try and draw customers, but failed because of the scarcity of diesel engines and because they were pitted against strong brands such as Honda’s Accord sedan and CR-V SUV, and Toyota Kirloskar Motor Pvt. Ltd’s Camry and Fortuner.

Maruti admitted in April that new buyers are skipping the Alto segment to buy bigger cars such as the WagonR and the Swift.

As a result, the market share of small cars such as Maruti Suzuki’s Alto and WagonR; Hyundai’s Eon and General Motors India Pvt. Ltd’s Chevrolet Spark has shrunk. The share of small cars priced between Rs.2.66 lakh and Rs.5 lakh shrank to 20% of 2.5 million passenger vehicles in the year ended 31 March from 27% in 2010-11, according to data compiled by the Society of Indian Automobile Manufacturers (Siam), an industry lobby.

Anil Sharma, a senior analyst with consulting firm IHS Automotive, is sceptical about Maruti’s move to create a separate sales network. “I don’t see immediate benefits from this strategy unless they build up a very strong product portfolio,” Sharma said. “There is no clear need as such,” he said, adding that this kind of situation arises when there is divergent thinking within the organization.

“Maruti will have to spend more as it will not only involve marketing networks, but also different advertising agencies and media planners,” he said.

In another significant development, Maruti has assigned new roles to Manohar Bhatt, vice-president (marketing), and Sunila Dhar, deputy general manager (marketing). Mint could not ascertain the nature of their new roles.

“They will be a part of a special team,” said the first person cited in the story.

In May 2014, Mint reported that Maruti Suzuki has stripped three chief operating officers (COOs) of their executive powers. The executives, two of whom were in charge at Manesar during a 2012 labour strike, are now ‘chief mentors”.

Sanjiv Handa has been named vice-president (marketing), essentially filling up for Bhatt and Vinay Pant, who looks after product planning and market research. Pant may get additional responsibility in the marketing team as well.

Deepak Sethi, chief general manager (supply chain), has been promoted as executive director.

Maruti, which is all set to start selling light commercial vehicles (LCVs) in a few months, has created a separate team to sell these vehicles. S.N. Burman, who is in-charge of rural and institutional sales, has been given additional responsibility to sell Maruti’s first LCV.

Maruti Suzuki will make the mini-truck at its Gurgaon plant. Maruti conceived the product in the 1980s but delayed its plans, which allowed rivals to corner the market. Tata Motors Ltd introduced the Ace, the first such product in the segment, in 2007 and attracted buyers in rural areas. Mahindra and Mahindra Ltd followed with the Gio in 2009. Ashok Leyland Ltd entered the segment with the Dost in 2012, but its sales efforts are concentrated in a few markets, primarily in south India.

Maruti’s product will be sold as commercial goods carrier with a carrying capacity of not more than 2 tonnes. It will be based on parent Suzuki Motor Co.’s Carry that it sells in Indonesia. The product has been redesigned by Maruti engineers to suit the requirements of Indian roads.