The Maruti 800 may no longer be as popular with Indian car buyers as it used to. But the iconic small car, manufactured by Maruti Suzuki India Ltd, the country’s largest car maker, is selling big in Africa. Over 4,600 units were shipped to Algeria alone, the company’s largest market in the continent, till August this financial year — an average monthly rise of 62 per cent.
The rising demand for the Maruti 800 in Africa reflects a shift in Maruti Suzuki’s export strategy, which, till a few years ago, was focussed on the European market. Officials say the company turned its attention to emerging markets in Asia and Latin America, as sales in Europe took a hit after European governments discontinued their car scrappage schemes in 2009. The scrappage programmes are government budget schemes to promote the replacement of old vehicles with modern ones.
Of the 47,000-odd units Maruti Suzuki exported between April and August this year, as much as 82 per cent went to non-European markets, compared with 23 per cent in 2009-10. While as much 30 per cent of the export volumes came from Africa (up from eight per cent in 2009-10), Latin America contributed 28 per cent (up from five per cent in FY10). Europe’s share in the company’s exports dwindled to 18 per cent from a record 77 per cent (114,000 units) in FY10.
“After the scrappage scheme was discontinued in Europe, we had to develop alternative sales pockets to maintain exports. Africa is a big market with nearly two million vehicles sold there annually,” said Shashank Srivastava, executive director (international market development) of Maruti Suzuki.
“However, nearly half the sales happen in used cars, with people preferring to buy bigger pre-owned vehicles. We decided to target those customers who hadn’t made purchase decisions to push sales of new cars,” he added.
To bring in more numbers, the company has diversified its product mix. It has started shipping out sedan DZire to Africa. Apart from the Maruti 800, it also sells small cars such as the Alto, the Alto K10 and the A-Star there. Large markets in the continent are Algeria, Angola, Mozambique, Nigeria and Egypt.
The company has a similar story to tell of Latin America, where it has grown sales fourfold to 21,000 units over the past four years.
However, this export journey is not free of challenges. In India, Maruti Suzuki is the market leader with a strong brand appeal and a robust distribution network. But in Africa, selling a made-in-India car proved difficult as initially, even distributors were sceptical. The company brought them to India for workshops.
“When they saw that nearly every second car plying on Indian roads is a Maruti Suzuki car, it changed their perception. Globally, in some markets, we have a small footprint, the brand is not well-known, but that, too, is an opportunity,” Srivastava said.
Describing the global market sentiments, he added: “In the domestic market, economic indicators are uniform across regions, but globally, many things affect sales. For instance, when copper prices go up, input costs rise in India. This leads to an increase in prices of vehicles and puts pressure on sales. But in Chile, which is a big exporter of copper, the market sentiment becomes buoyant. Rising commodity prices have a positive impact on markets in Brazil, Chile and Australia.”
Maruti Suzuki’s net profit plunged a whopping 29 per cent to Rs 1,635 crore last financial year on the back of adverse foreign exchange (forex) fluctuations and sluggish sales of petrol vehicles. The car maker’s net forex exposure stands at $1.7 billion (Rs 8,985 crore). The company plans to reduce it by 65 per cent to $600 million by 2014-15.
“Over the last two years, the yen (Japanese currency) has strengthened by 50 per cent, while the dollar has appreciated by nearly 20 per cent, which has raised substantially our import bills. The natural hedge against fluctuating exchange rates is to increase exports,” Srivastava said.
While programmes have been put in place to improve localisation levels, along with vendors, to slash import bill by 28 per cent to $ 1.8 billion from the current $ 2.5 billion over the next three years, revenues from exports are targeted to grow 50 per cent to $1.2 billion.