Follow us on 
BS Motoring Web  
  Thursday, Sep 18, 2014
 
HomeCarsBikesTravelGalleryBlogsWeb TVAbout us
  Tests    Reviews    News    Features    Motorsports    Motor shows    Classics    Quick Comparisons
 
Home Cars News
Jam for Maruti's bread & butter
Can the new Maruti 800 cc alter its fortunes in the entry-level mini segment?
By : Ram Prasad Sahu | Published : July 18, 2012 | Photos : BSM
Email   Print   [] Comment      
Maruti Suzuki Alto 800
More Photos | Video
 

Maruti Suzuki’s volume growth in the entry-level mini segment has fallen for 14 months in a row. That’s bad news for the company as the segment once used to contribute 59 per cent to its passenger car sales a year ago. That number is now down to 44 per cent.

It is thus obvious why Maruti wants to reverse the trend – hence it plans to launch a fuel-efficient car powered by a 800 cc engine. The new car is likely to hit the showrooms at the start of the festival season in September.

Will it work? Analysts believe that new launches could be the only way to keep customer interest alive in the mini segment which is critical for Maruti. Subrata Ray senior VP, Co-head, Corporate Sector Ratings, ICRA, says he expects the segment’s fortunes to get a positive trigger only by way of introduction of new products at further reduced price points and with better operating economics, enhancing affordability.

Echoing this view, Abdul Majeed - Leader Automotive Practice, PwC India, says that new launches are warranted given product life cycles have shortened from five-six years to two-three years now. It is in this context that Maruti Suzuki’s new car, may well be the vital shot in the arm needed by the mini segment. “However, it will work only if it is able to bridge the existing need-affordability divergence,” says Ray.

Maruti will not only have to reverse the trend of falling sales of its petrol driven portfolio in the mini segment but also price the product attractively to counter weakening overall demand. The management, however, is unwilling to comment on future launches and the pricing strategy of the new product.

The irony for the king of small cars is that its larger, pricier diesel-driven vehicles have a waiting period, while it has to offer steep discounts to push its bread-and-butter mini segment of petrol driven cars. Despite the discounts, sales of M800, Alto, A-Star, Wagon R fell 22 per cent y-o-y in the June quarter while those of Swift, Dzire have grown 31-87 per cent year-on-year (y-o-y). Further, the company’s efforts to give a facelift to A-Star earlier during the year too did not help. Mayank Pareek, chief operating officer (marketing & sales), Maruti Suzuki, blames the slowdown for the lack of response to the launch as also the muted volumes in the mini segment.

Despite falling sales, it is too early to write the epitaph for petrol driven vehicles, say analysts. Kumar Kandaswami – Senior Director, Deloitte, says the price differential may not last forever and for some price points it may make more sense to buy a diesel car. In a downturn, given the strain on budgets, no manufacturer would like to ignore this critical segment of smaller petrol driven cars. “The strategy is to make them uptrade through their portfolio,” he says.

With consumers leaning towards diesel cars given the cost of ownership, bulk of which is fuel consumption, the company has to get the pricing as well as the positioning of the new 800cc vehicle right. Among its competitors at the lower end, the Tata Nano sells between Rs 1.54 lakh and Rs 2.15 lakh in Mumbai while its lowest priced product, the Maruti 800 is priced upwards of Rs 2.2 lakh.

The company could seek to bridge this gap. Ajay Shethiya, analyst at Centrum Broking, says Maruti wants to target the lower end of the pyramid and the logical positioning would be at about Rs 2-2.5 lakh. This would fill the gap and compensate a bit for the falling sales of the Maruti 800.

Maruti Suzuki will also be mindful of the fact that the Nano is clocking 5,600 units a month and its closest rival in the passenger car segment Hyundai too has had a successful run at the entry level with the Eon (launched in October last year) which is selling 7,000 units a month. The 800 in contrast is doing about 1,000 units a month while Alto’s sales (price Rs 2.56 lakh-Rs 3.62) are pegged at about 21,000 units a month, down from an average of 30,000 units in FY12.

Given that the car will be fuel efficient and technologically more advanced than the existing 800 cc options, the company could price it upwards of Rs 2.5 lakh which could eat into Alto’s sales. Another factor which weighs in favour of pricing it over Rs 2.5 lakh is the fact that 40 per cent of existing Alto sales come from the Alto K10 which starts at Rs 3.14 lakh.

Will a fuel efficient, attractively priced product change the fortunes of its key segment? Analysts views on this are mixed. Says S Arun, research analyst at Bank of America Merrill Lynch, “Judging by the firm’s track record, we rate the success probability as quite high, the unique selling proposition being a proven platform (Alto) and a contemporary engine that will redefine the fuel-efficiency paradigm. An auto analyst with a leading brokerage house, however, says that the launch might not reflect meaningfully on the numbers. “While it may not garner an overwhelming response, in a situation of falling footfalls and lower conversions, it does create a buzz around the brand.” Maruti Suzuki, for one, would be hoping that its new launch will create the requisite buzz and lift the sales fortunes of its small car portfolio.

Pages :| 1 
Advertisements
Email Print [0] Comment        
blog comments powered by Disqus
Read Emailed Commented
Other Manufacturers Other Models
 
Explore BSMOTORING.COM
  Home   Cars   Bikes   Gallery   General   Resources   Explore Group Network
 Quick Comparisons
 Road Tests
 Motofocus
 Motorsports
 Destinations
 Tests
 Reviews
 News
 Features
 Motorsports
 Motor shows
 Classics
 Quick Comparisons
 Tests
 Reviews
 News
 Features
 Motorsports
 Motor shows
 Classics
 Quick Comparisons
 Photo Gallery
 Video Gallery
 Wallpaper
 Travel
 Blogs
 About us
 Archives
 Register
 Feedback
 Archives
 Advertise with us
 Contact Us
 Business-standard.com
 bshindi.com
 Archives
 Livemarkets
 smartportfolio II