Rivals take on Maruti's bestsellers

From April to May, this year, three brands of Maruti Suzuki (Maruti) brought in as much as 46 per cent of its domestic sales volumes. The Swift, Swift Dzire and the Ertiga sold all of 77,217 units in the first two months of 2013-14. With the average selling price of these brands realising 1.5 times the margins of its other models, they contribute an even higher proportion in the company's revenues.

Despite the slowdown in the domestic car market, rival manufacturers - Honda Motor Company (Honda), General Motors (GM) and Mahindra & Mahindra (M&M) - have come up with their own challengers to Maruti's current bestsellers in the span of April-June, 2013.

The first diesel car from Honda's stables for the Indian market, Amaze, entered in April, this year. GM followed with its Chevrolet Enjoy in May, while M&M launched the Verito Vibe in June. The Amaze, built on the small car, Brio's platform, has been pitted against Maruti's compact sedan, the Swift Dzire; GM's multi-purpose vehicle (MPV) Enjoy goes up against the Ertiga; M&M's Vibe, built on the sedan Verito's platform, will compete with the popular premium hatchback, Swift.

However, it will be a mottled start for the new challengers. Industry experts say that the Amaze may build up the heat on the Dzire, but the Chevrolet Enjoy and Mahindra Vibe are unlikely to pose serious threats to Maruti. "Except for the Honda Amaze, which definitely is posing a challenge to Maruti Suzuki Dzire, the other products have not been able to cut much ice with customers. Mahindra does not have a brand presence in the small car segment and is known, largely, for its utility vehicles (UV). The Enjoy too seems more like a replacement for the Tavera, rather than a competitor to the Ertiga," observes V G Ramakrishnan, senior director (automotive practice), Frost & Sullivan.

Pawan Goenka, president (automotive and farm equipment sectors), M&M, says, "We are entering into a larger volume segment with the Vibe. We are a UV player with six to eight models and one car. The Verito matches our company's DNA of being rugged, stylish, reliable and has a boot to go with it." However, even if M&M wants to replicate its USP in its small car, its targets for now betray a cautious approach. Despite competitive price-points, M&M aims to just double sales of vehicles on the Verito platform, even after the introduction of the Vibe. Sales of the Verito sedan had declined to around 800 units a month in recent times, down from around 1,300 vehicles,earlier. Assuming that the Vibe sells 800-1,000 units a month, the volumes would still be negligible compared to the 15,400 units a month that the Swift clocked last financial year.

However, the Swift has seen a year-on-year decline in this financial year's first two months. In the same time (please see chart), Ertiga's sales have dipped as well. But the Chevrolet Enjoy sold 2,177 units in May and may not have made a large dent in the demand for Ertiga. Lowell Paddock, president and managing director, General Motors India, says, "The Enjoy will compete in one of the fastest-growing segments in India. We expect that this model will be a success considering its attributes and pricing."

However, observers say it is the Renault Duster and Ford EcoSport (scheduled for launch on the 26th of June) that Maruti has to reckon with. When Ertiga sold 9,623 units, Renault's Duster sold 10,508 units.

Of the new Maruti challengers, the Amaze has done the best.

The data from the Society of Indian Automobile Manufacturers (SIAM) on entry-level sedans show the Amaze (with sales of 10,888 units) has grabbed 20.4 per cent share in the domestic market in April-May. Meanwhile, the share of the Dzire - which sold three out of every four entry-level sedans, last year - slipped to 68.8 per cent.

Yoshiyuki Matsumoto, managing officer, Honda Motor Company, says, "The Amaze is our most strategic model in the Indian market and has been developed with a strong focus on Indian requirements." His colleague, Hironori Kanayama, president & CEO, Honda Cars India Ltd, adds, "We have worked on aggressive localisation overcoming many challenges in terms of timelines, technology and costs. Amaze will be a game-changer for us." The Amaze has localisation levels of around 90 per cent.

While it is priced at an aggressive Rs 5.99 lakh for the diesel and Rs 4.99 lakh for the petrol variants, the Dzire comes for upwards of Rs 5.99 lakh for the diesel and Rs 4.92 lakh for the petrol versions. The Amaze sports Honda's new 1.5-litre, i-DTEC diesel engine which the company claims delivers fuel efficiency of 25.8 kmpl, higher than the 23.4 kmpl offered by the diesel variant of the Dzire.

But, even though Honda has seen a strong demand for the Amaze, industry observers say that its capacity constraints is posing a challenge. Honda can produce 10,000 units every month at Greater Noida, half of which has been set aside for production of its new sedan. Honda's second vehicle assembly line at Tapukara (Rajasthan) with a capacity to roll out 120,000 units per annum will come onstream only next year.

JPMorgan concurs that competition is eyeing Maruti's sweet spot and that the company will cede shares in these high-growth segments (entry-level sedan and MPVs). In fact, new launches from Honda and Ford (Ecosport) are expected to eat into Maruti's profitability. Maruti's woes will multiply as more products are expected to be launched in the price-band of Rs 6-8 lakh in these segments.

The silver lining for Maruti is that even though volumes declined by 6.34 per cent to 168,344 units in April-May 2013, the company has managed to out-perform sales in the passenger vehicle industry, which slid by 8.56 per cent. Maruti, then remains a formidable incumbent to beat, increasing its market share marginally from 40 per cent to 41 per cent, year-on-year in May 2013. Its rivals need to come up with ingenious go-to-market plans for their new models. Maruti already plans to bolster its prospects by launching a reported compact SUV and more sedans across entry, mid-sized and premium categories.