Maruti Suzuki has remained India’s favourite carmaker for more than three decades.
From manufacturing the iconic Maruti 800 – which sold more than two million units – to the hugely successful Maruti Esteem and Alto, the New Delhi-headquartered automaker has tasted success like no other carmaker in Asia’s third-largest economy. Today, it controls over 45% of the Indian passenger vehicle market, currently the sixth largest in the world.
But Maruti Suzuki has an image problem: It is often perceived as the common man’s carmaker, and its multiple attempts to break away from that label haven’t entirely delivered.
Over the past four months, though, Maruti Suzuki is slowly shifting gears and attempting to draw more premium customers.
At the centre of the experiment are two premium cars – the Baleno and the S-Cross – and a network of prime stores across the country to sell these high-end models. The showrooms – named NEXA – have personalised relationship managers, iPad-operated store systems and virtual tours. The company will also launch a mobile app, on which owners can track service history, emergency support, accessory purchase and such details.
Maruti’s ambitions are a far cry from its roots in pre-liberalised India. Once a state-directed partnership with Japan’s Suzuki Motors, which was later privatised, Maruti started producing cars in India in 1981. And for more than two decades, its star product was undoubtedly the diminutive Maruti 800.
Despite being a low-cost carmaker, Maruti still remains one of the most profitable auto manufacturers in India. Its revenue has grown by 35% over the past five years. In 2015, Maruti reported revenue of Rs 49,970 crore with a net profit of Rs 3,711 crore.
In the quarter ended September 30, the company posted a 42.1% increase in net profit, on the back of rising car sales and a drop in raw material cost. Maruti Suzuki did not reply to Quartz’s email seeking additional details.
Changing perceptions
“Maruti is known for their small cars,” Abdul Majeed, partner at consultancy firm PwC, told Quartz. “The company has been unable to hold back its customers. Very often, when a customer upgrades to a better car, Maruti loses out since they are not preferred.”
“India’s luxury market is growing and the potential is huge and that is precisely why there is a change in Maruti’s game plan. It is all about changing perception,” Majeed added.
In July, when Maruti launched the first of its NEXA showrooms, Kenichi Ayukawa, Maruti’s CEO and managing director, acknowledged the immediate need to cater to “customers who value pampering, innovation and a personal touch in their car owning.”
“NEXA provides a new experience of hospitality from Maruti Suzuki,” Ayukawa said in a statement. “(The) Indian market and Indian society are rapidly changing and new segments of customers are emerging. We have to take new initiatives to meet diversifying expectations from our customers.”
“The average age of a Maruti car owner is around 38 years, which typically means he comes from a middle-class Indian family,” Deepesh Rathore, co-founder and director at Gurgaon-based consultancy firm EMMAAA, told Quartz. “The earlier a customer enters a company, the more they are likely to remain with it. And that is what Maruti is now trying to do by wooing customers, especially young and affluent Indians through these outlets.”
So far, the company has hired nearly 1,000 relationship managers, and it will hire 1,500 more in the next few months for its stores, which have a distinct white-and-black theme. This huge expansion is for a much bigger ambition: By 2020, Maruti wants to sell two million vehicles annually.
“But it won’t be an easy journey because it’s not easy to change perception,” said PwC’s Majeed. “Probably in the medium to long term, these stores will be able to attract customers. And for that, Maruti needs to keep trying hard. The problem with the carmaker has been that it could never appeal to the premium customers with its existing dealership and distribution model.”
More premium cars
Last month, the company relaunched the Baleno, a premium hatchback. At Rs 4.9 lakh, it is one of the lowest priced cars in the segment.
"We believe that this is the most significant launch from Maruti in recent times as this will pose a strong challenge for incumbents like Hyundai’s i20, Honda’s Jazz and VW’s Polo,” a research report by investment bank Nomura said. “(The) success of this model will also boost Maruti’s strategy of being seen as a more premium car company,”
The success of Baleno will also improve the company’s volumes. For instance, Nomura estimates that if Maruti sells about 5,000 to 7,000 Baleno cars every month, it could mean a 4-5% increase in volumes. Early next year, Maruti will also begin exporting the revamped Baleno to Japan—its first made-in-India car to be sold in Suzuki’s home market. Overall, the premium hatchback segment sells around 20,000 units per month.
But Maruti has failed with the Baleno in the past. Almost a decade-and-a-half ago, the carmaker launched Baleno as a premium car with a price tag of Rs8 lakh. It was forced to discontinue the model in 2007 due to the lack of sales.
Earlier in August, it also launched the S-Cross – a crossover utility vehicle – in India. Like the Baleno, it will also be sold at the NEXA showrooms.
“We have got a good initial response from the market. We are targeting the premium segment for the first time as a 45% market share in the passenger vehicles market leaves us vying for the other 55% of market currently not with us,” Ayukawa said after the launch.
Over the next few months, Maruti is primed for a number of launches, including a compact SUV, similar to the Ford EcoSport, and a revamped Swift.
“For the next 24 months, they won’t have a problem with their product pipeline. But as far as this stress to build up a premium brand goes, it looks like a half-hearted attempt,” explained Rathore. “They could have created a luxury and sports division within the company and sold cars under that badge. No Indian carmaker is doing what Maruti is doing and time will tell if this was all worth the effort.”
This article was originally published on qz.com.
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From manufacturing the iconic Maruti 800 – which sold more than two million units – to the hugely successful Maruti Esteem and Alto, the New Delhi-headquartered automaker has tasted success like no other carmaker in Asia’s third-largest economy. Today, it controls over 45% of the Indian passenger vehicle market, currently the sixth largest in the world.
But Maruti Suzuki has an image problem: It is often perceived as the common man’s carmaker, and its multiple attempts to break away from that label haven’t entirely delivered.
Over the past four months, though, Maruti Suzuki is slowly shifting gears and attempting to draw more premium customers.
At the centre of the experiment are two premium cars – the Baleno and the S-Cross – and a network of prime stores across the country to sell these high-end models. The showrooms – named NEXA – have personalised relationship managers, iPad-operated store systems and virtual tours. The company will also launch a mobile app, on which owners can track service history, emergency support, accessory purchase and such details.
Maruti’s ambitions are a far cry from its roots in pre-liberalised India. Once a state-directed partnership with Japan’s Suzuki Motors, which was later privatised, Maruti started producing cars in India in 1981. And for more than two decades, its star product was undoubtedly the diminutive Maruti 800.
Despite being a low-cost carmaker, Maruti still remains one of the most profitable auto manufacturers in India. Its revenue has grown by 35% over the past five years. In 2015, Maruti reported revenue of Rs 49,970 crore with a net profit of Rs 3,711 crore.
In the quarter ended September 30, the company posted a 42.1% increase in net profit, on the back of rising car sales and a drop in raw material cost. Maruti Suzuki did not reply to Quartz’s email seeking additional details.
Changing perceptions
“Maruti is known for their small cars,” Abdul Majeed, partner at consultancy firm PwC, told Quartz. “The company has been unable to hold back its customers. Very often, when a customer upgrades to a better car, Maruti loses out since they are not preferred.”
“India’s luxury market is growing and the potential is huge and that is precisely why there is a change in Maruti’s game plan. It is all about changing perception,” Majeed added.
In July, when Maruti launched the first of its NEXA showrooms, Kenichi Ayukawa, Maruti’s CEO and managing director, acknowledged the immediate need to cater to “customers who value pampering, innovation and a personal touch in their car owning.”
“NEXA provides a new experience of hospitality from Maruti Suzuki,” Ayukawa said in a statement. “(The) Indian market and Indian society are rapidly changing and new segments of customers are emerging. We have to take new initiatives to meet diversifying expectations from our customers.”
“The average age of a Maruti car owner is around 38 years, which typically means he comes from a middle-class Indian family,” Deepesh Rathore, co-founder and director at Gurgaon-based consultancy firm EMMAAA, told Quartz. “The earlier a customer enters a company, the more they are likely to remain with it. And that is what Maruti is now trying to do by wooing customers, especially young and affluent Indians through these outlets.”
So far, the company has hired nearly 1,000 relationship managers, and it will hire 1,500 more in the next few months for its stores, which have a distinct white-and-black theme. This huge expansion is for a much bigger ambition: By 2020, Maruti wants to sell two million vehicles annually.
“But it won’t be an easy journey because it’s not easy to change perception,” said PwC’s Majeed. “Probably in the medium to long term, these stores will be able to attract customers. And for that, Maruti needs to keep trying hard. The problem with the carmaker has been that it could never appeal to the premium customers with its existing dealership and distribution model.”
More premium cars
Last month, the company relaunched the Baleno, a premium hatchback. At Rs 4.9 lakh, it is one of the lowest priced cars in the segment.
"We believe that this is the most significant launch from Maruti in recent times as this will pose a strong challenge for incumbents like Hyundai’s i20, Honda’s Jazz and VW’s Polo,” a research report by investment bank Nomura said. “(The) success of this model will also boost Maruti’s strategy of being seen as a more premium car company,”
The success of Baleno will also improve the company’s volumes. For instance, Nomura estimates that if Maruti sells about 5,000 to 7,000 Baleno cars every month, it could mean a 4-5% increase in volumes. Early next year, Maruti will also begin exporting the revamped Baleno to Japan—its first made-in-India car to be sold in Suzuki’s home market. Overall, the premium hatchback segment sells around 20,000 units per month.
But Maruti has failed with the Baleno in the past. Almost a decade-and-a-half ago, the carmaker launched Baleno as a premium car with a price tag of Rs8 lakh. It was forced to discontinue the model in 2007 due to the lack of sales.
Earlier in August, it also launched the S-Cross – a crossover utility vehicle – in India. Like the Baleno, it will also be sold at the NEXA showrooms.
“We have got a good initial response from the market. We are targeting the premium segment for the first time as a 45% market share in the passenger vehicles market leaves us vying for the other 55% of market currently not with us,” Ayukawa said after the launch.
Over the next few months, Maruti is primed for a number of launches, including a compact SUV, similar to the Ford EcoSport, and a revamped Swift.
“For the next 24 months, they won’t have a problem with their product pipeline. But as far as this stress to build up a premium brand goes, it looks like a half-hearted attempt,” explained Rathore. “They could have created a luxury and sports division within the company and sold cars under that badge. No Indian carmaker is doing what Maruti is doing and time will tell if this was all worth the effort.”
This article was originally published on qz.com.
