Maruti’s segment focus shift could upend India’s auto market

New Delhi: More than a decade ago, when Tata Motors unveiled its plans to build and launch a ‘people’s car’, the Nano, an affordable small car in India, it was a turning point in the ‘India Story’. It was clear that India’s new economic power would draw on the country’s demographic dividend, a fast-growing consumer market of not-so-rich Indians.

The small car was a winner – delivering volumes to the manufacturer and serving consumers just what they wanted. The reigning automotive market leader, Maruti Suzuki, had established its dominance through a proliferation of small, affordable cars starting with the Maruti 800, the Zen, the Alto, the WagonR and several others over decades. Analysts predicted that the market could only grow, and India’s position as a ‘small car country’ would endure.

Just fourteen years later, the trend has shifted sharply, with the SUV, or the sports utility vehicle, becoming the car of choice across consumer classes and geographies and manufacturers for whom they represent a juicy slice of market share and business growth. Indeed, SUVs are the fastest-growing segment of the passenger vehicle industry.

The biggest affirmation for the big shift has come from Maruti Suzuki. The Economic Times has reported that the undisputed leader of the industry has set its eyes on the top spot for SUVs, a segment where it isn’t even in the reckoning for the second position at the moment.

Maruti commands a market share of nearly half to 97% in all the rest of the passenger vehicle segments. In SUVs, its market share is a low 12% but Maruti has set itself a target for growing this and aim for pole position in the SUV race over the next 12 to 18 months.

The company’s premium car models include Ciaz and SUVs such as the A-Cross and the XL-6, all sold through its premium Nexa dealerships. (As against the Alto, Swift, Dzire and other cars, as well as also the SUV, Brezza, that are sold through mainstream dealerships called Arena.)

Plans are afoot for new SUV launches from the Maruti stable. These may include the Jimny, the Baleno Crossover and a new Brezza, according to The Economic Times report. The launches are to deliver as many as a quarter of a million units of fresh sales per year to help Maruti double its market share. Component suppliers and dealers are already prepping to handle the volumes, reportedly.

What does the big shift in Maruti’s strategy mean for rivals like Hyundai, Kia, Tata Motors, and Mahindra & Mahindra? It is a wake-up call.

Japanese corporations have a reputation for manufacturing and for the ability to turn adversity into an advantage. Maruti, the presumed sleeping giant, when awakened, can set off industry tremors with new models, and the depth, breadth and sweeping expanse of its dealer networks, and sales centers across the country. Maruti’s portfolio, even though designed to be economical, practical and low on cost of maintenance, has been built steadily over the years with ‘inching-closer-to-premium’ cars. Its Nexa-badged range of cars have designs and features usually seen in pricier vehicles.

It’s inevitable that the industry is set for stiff competition. If that makes the cake larger, which is more than likely, it can only be good news for the entire industry. For if Maruti’s past track record is any indicator, then its three new SUVs (and possibly many more on the way that hasn’t been announced yet) would boost market share, volumes, and revenue for the market leader and also trigger a new race amongst car-makers. A race for pushing out new SUV models catering to the complex and highly segmented demography of Indian car buyers.

There are a few more years still before India goes from “small car-nation” to “SUV-nation” but that’s a question of when; not whether or not — this is what Maruti gearing up to shift its focus on the SUV segment shows.

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