Maruti premium dealerships to sell only S-Cross initially

Maruti Suzuki will launch its premium dealership Nexa on Thursday. Meant for buyers of premium cars, these dealers will only stock the company’s upcoming crossover, the S-Cross, to begin with.

This is the Indian automobile industry’s first experiment with creating a new sales network. The decision to set up Nexa follows the Indian buyers’ preference for more space and better features in cars.

Maruti is trying to break the jinx of previous failures with premium vehicles like the Baleno, Kizashi and Grand Vitara. The company is still widely perceived as a manufacturer of small and compact cars, though it has made inroads into the premium segment with the Ciaz, which has sold 45,000 since its October launch.

Many Ciaz buyers are Maruti’s customers seeking an upgrade. Maruti is banking on these customers who earlier used to switch to competitors in search of premium vehicles. “A chunk of customers strayed away from us because we did not have a portfolio. We hope they will come back to us,” said R S Kalsi, executive director, sales and marketing, Maruti Suzuki.

CLSA India said in a recent report that it was “positive on Maruti’s initiatives to increase its presence in higher-priced segments and (the company) launching new models and creating a premium sales channel”. It, however, said Nexa dealerships might see some teething problems due to weak profitability and the challenges of managing multiple channels. Nexa customers will rely on the existing network for servicing cars. The existing Maruti dealers’ network will not sell the S-Cross and future premium vehicles. But they will earn a commission by passing on leads to Nexa dealerships.

A car dealership is unlikely to be profitable with just one vehicle model but Maruti will roll out more premium cars. “There is clarity that there will be a gestation period in these dealerships,” Kalsi said.

Maruti might initially support Nexa dealers till more cars were sold through them, Credit Suisse said in a report. CLSA said Maruti admitted in an analyst meet that the profitability of Nexa dealerships could be under pressure but it expected this to ease as new vehicles were added to their portfolio. Maruti plans to set up 100 Nexa dealerships in 30 cities in 2014-15. Apart from the metros, the dealerships will come up in state capitals and cities like Indore and Mohali. Spread over 2,500-3,000 sq ft, Nexa dealerships will have luxury lounges, wall mounted digital displays, and relationship managers, most of whom have been hired from the hospitality sectors.