For almost a year, Narendar Singh tossed the idea around in his head. The 40-year-old TCS executive wanted to buy a second car for his family. With aMaruti Swift (petrol variant) already in his garage, his wife and two children wanted him to explore other models.
In fact he did check out a few. He test drove Ford Figo and found it smaller than the Swift. He considered VW's Polo and rejected it. He did not like i20 for its poor mileage. He liked the Nissan Micra but it was a bit pricier than the Swift.
Last week, he finally made up his mind and booked another Swift (diesel) for the family. "On all counts, I found Swift better than the others at that price. Also, as a Swift owner, I am 100% satisfied with the car," he says.
With the lockout at Maruti Suzuki's Manesar plant likely to be lifted by Tuesday, his wait may not stretch inexorably. However, Singh is willingly to wait for his car. "I can easily wait. I do have a car to drive," he says.
Down But Never Out
For almost a month now, India's largest carmaker — Maruti Suzuki — has been struggling. Its Manesar plant, which churns out the popular Swift and Dziremodels, is closed. For Maruti, the plant shutdown couldn't have come at a worse time. The sentiments in Indian car industry are down with sluggish sales even as production costs and prices are rising.
In fact he did check out a few. He test drove Ford Figo and found it smaller than the Swift. He considered VW's Polo and rejected it. He did not like i20 for its poor mileage. He liked the Nissan Micra but it was a bit pricier than the Swift.
Last week, he finally made up his mind and booked another Swift (diesel) for the family. "On all counts, I found Swift better than the others at that price. Also, as a Swift owner, I am 100% satisfied with the car," he says.
With the lockout at Maruti Suzuki's Manesar plant likely to be lifted by Tuesday, his wait may not stretch inexorably. However, Singh is willingly to wait for his car. "I can easily wait. I do have a car to drive," he says.
Down But Never Out
For almost a month now, India's largest carmaker — Maruti Suzuki — has been struggling. Its Manesar plant, which churns out the popular Swift and Dziremodels, is closed. For Maruti, the plant shutdown couldn't have come at a worse time. The sentiments in Indian car industry are down with sluggish sales even as production costs and prices are rising.
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So when the news of Maruti lockout hit headlines, the competition instantly began plotting. Closest rival Hyundai sent out letters to its dealers to push its cars. Ford, Skoda and other carmakers are figuring ways to lure away Maruti's customers. A slew of entry-level sedans — from GM Sail, Tata's Indigo Manza CS to Renault Scala and Ford Fiesta — will be launched soon to take on Maruti's Dzire.
But so far, loyal customers like Singh have bolstered Maruti's hopes. Maruti's marketing chief Mayank Pareek says despite the uncertainty and long waiting period, they have had no cancellations and many customers continue to book their cars. Rana Motors, a Maruti dealer in Delhi, says new bookings have dipped marginally — from 43 Swift bookings in the first half of July to about 30 in August.
"I see a marginal impact [of the lockout]. In the long run, I expect Maruti to retain its market share," says Deepesh Rathore, director, India, IHS Global Insight, a research firm. In a market where 17 carmakers with 91 models are jostling for space, Maruti's grip over the Indian car buyer — even with a lockout — is commendable. So what makes Maruti cars so compelling?
Not Just Price Alone
First a status update. Maruti's Manesar plant has a capacity to churn out 14,000 units of Dzire and 20,000 units of Swift every month. The models were first launched in 2005 and 2008 respectively and in the past 12 months underwent a facelift.
"Swift has had a waiting period ever since its launch," says Pareek. Such has been its popularity that Swift continued to have a waiting period ahead of its re-launch last year — a rare phenomenon in the car industry. The slightly pricier Dzire too has been equally popular.
"I see a marginal impact [of the lockout]. In the long run, I expect Maruti to retain its market share," says Deepesh Rathore, director, India, IHS Global Insight, a research firm. In a market where 17 carmakers with 91 models are jostling for space, Maruti's grip over the Indian car buyer — even with a lockout — is commendable. So what makes Maruti cars so compelling?
Not Just Price Alone
First a status update. Maruti's Manesar plant has a capacity to churn out 14,000 units of Dzire and 20,000 units of Swift every month. The models were first launched in 2005 and 2008 respectively and in the past 12 months underwent a facelift.
"Swift has had a waiting period ever since its launch," says Pareek. Such has been its popularity that Swift continued to have a waiting period ahead of its re-launch last year — a rare phenomenon in the car industry. The slightly pricier Dzire too has been equally popular.
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The two models today average a waiting period of around five-six months. The plant is set to open soon, albeit with much lower production before returning to full capacity — which means Maruti will take some time to clear the backlog. Put this in context: if one takes into account an average six-month waiting period, it would imply about two lakh Swift/Dzire customers are wait-listed. This at a time when car companies in India are trying desperately to lure customers.
So what makes Swift and Dzire so popular among customers? "As a product Swift is phenomenal. It offers Maruti's value for money with loads of emotions and performance," says Hormazd Sorabjee, editor,Autocar India. Maruti has always been about basic, value-for-money cars which are often boring but practical and appealed to millions of aspiring Indians looking for their first cars.
Swift was Maruti's first attempt to stray away from that philosophy. Swift offers good performance, is fun to drive even as it packs in Maruti's value-for-money punch. It is also a very global car in its design and build quality. "Compare that to Toyota Etios which cannot be sold in Europe," says Sorabjee.
Combine all that with Maruti's aggressive pricing — and you have a perfect offering. In the past five-seven years, many new original equipment manufacturers such as VW, Toyota, Nissan and Honda have entered the premium compact segment, Maruti's traditional bastion.
"Despite that none of them is seriously challenging Maruti," says VG Ramakrishnan, senior director (automotive practice), Frost & Sullivan, a consultant. That is because nobody is able to bundle good price with great product as well as Maruti does with Swift and Dzire. Look at VW's Polo. The rumour is that the company is losing about Rs 50,000-plus on every Polo it sells and yet the model remains one of the pricier cars in the premium compact segment.
And of course there is the price factor. India is perhaps the most price sensitive market in the world, says Rathore. IHS studies found that in India, over one in four customers rejected a car because of the price. In China over one in eight customers rejected a car for the same reason. This sensitivity to price makes Maruti cars very compelling for Indians.
Swift was Maruti's first attempt to stray away from that philosophy. Swift offers good performance, is fun to drive even as it packs in Maruti's value-for-money punch. It is also a very global car in its design and build quality. "Compare that to Toyota Etios which cannot be sold in Europe," says Sorabjee.
Combine all that with Maruti's aggressive pricing — and you have a perfect offering. In the past five-seven years, many new original equipment manufacturers such as VW, Toyota, Nissan and Honda have entered the premium compact segment, Maruti's traditional bastion.
"Despite that none of them is seriously challenging Maruti," says VG Ramakrishnan, senior director (automotive practice), Frost & Sullivan, a consultant. That is because nobody is able to bundle good price with great product as well as Maruti does with Swift and Dzire. Look at VW's Polo. The rumour is that the company is losing about Rs 50,000-plus on every Polo it sells and yet the model remains one of the pricier cars in the premium compact segment.
And of course there is the price factor. India is perhaps the most price sensitive market in the world, says Rathore. IHS studies found that in India, over one in four customers rejected a car because of the price. In China over one in eight customers rejected a car for the same reason. This sensitivity to price makes Maruti cars very compelling for Indians.
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Reading the Market
This isn't the first time Maruti has managed to hit the sweet spot in the Indian car market. The journey first began with the launch of Maruti 800 in 1984, much before India liberalised. The car remained at the top of the charts for close to two decades and till date remains the most sold car in the country.
Alto has been its true successor. Upgrading with Indian customers, Maruti launched and refreshed its entry-level Alto, equipping it with better technology and interiors. Despite many launches — from a cheaper Tata Nano to an aggressively priced Hyundai Eon — Alto remains the most popular entry-level car.
"Maruti has always been ahead of the competition in launching a model in a segment that will peak in the future," says Ramakrishnan. Swift is a great example. This was the first real premium compact to hit the Indian market in mid-2000s. Almost everybody including Honda, Toyota, Ford came much later. The aggressive Korean did time it well with Getz but got the product and pricing wrong with the result that it received very lukewarm response.
Is Ertiga the Next Money-spinner?
Maruti is now hoping to repeat its success with the seven-seater Ertiga. Launched in April this year, it looks like a winner. It is the second most popular multi-purpose vehicle (MPV) selling 7,600 units last month and has a waiting period of six months.
Sometimes one wonders if this "waiting period" is a deliberate strategy on part of Maruti to create a 'pull'. Manufacturers like Honda have often leaned on this strategy (its City used to be a good example) to maintain its brand premium. Pareek denies it. He says when Ertiga was launched in April the monthly production capacity stood at 4,000. "We have scaled it up to 6,000 now. But you can only scale up that much. The demand has far outstripped supply," he says.
This isn't the first time Maruti has managed to hit the sweet spot in the Indian car market. The journey first began with the launch of Maruti 800 in 1984, much before India liberalised. The car remained at the top of the charts for close to two decades and till date remains the most sold car in the country.
Alto has been its true successor. Upgrading with Indian customers, Maruti launched and refreshed its entry-level Alto, equipping it with better technology and interiors. Despite many launches — from a cheaper Tata Nano to an aggressively priced Hyundai Eon — Alto remains the most popular entry-level car.
"Maruti has always been ahead of the competition in launching a model in a segment that will peak in the future," says Ramakrishnan. Swift is a great example. This was the first real premium compact to hit the Indian market in mid-2000s. Almost everybody including Honda, Toyota, Ford came much later. The aggressive Korean did time it well with Getz but got the product and pricing wrong with the result that it received very lukewarm response.
Is Ertiga the Next Money-spinner?
Maruti is now hoping to repeat its success with the seven-seater Ertiga. Launched in April this year, it looks like a winner. It is the second most popular multi-purpose vehicle (MPV) selling 7,600 units last month and has a waiting period of six months.
Sometimes one wonders if this "waiting period" is a deliberate strategy on part of Maruti to create a 'pull'. Manufacturers like Honda have often leaned on this strategy (its City used to be a good example) to maintain its brand premium. Pareek denies it. He says when Ertiga was launched in April the monthly production capacity stood at 4,000. "We have scaled it up to 6,000 now. But you can only scale up that much. The demand has far outstripped supply," he says.
Ertiga is a great example to understand Maruti's "hitting the sweet spot" strategy. There are over 18 MPVs (seven-seaters) today in the Indian market jostling for space. At one end are the cheap ones like Mahindra Bolero (the leader grosses monthly sales of over 9,000) starting at around Rs 5 lakh.
Functional, utilitarian and lacking in aesthetics, they are mostly used as taxis and cabs for commercial purposes. At the other end are the Innova, XUV, Endeavour and Fortuner, which are aesthetically and performance wise better but are pricier (Rs 8-lakh-plus).
Amid all this, Maruti offers a well-designed and good-looking Ertiga starting at Rs 6-lakh-plus. "Ertiga has hit the sweet spot in India," says Mohit Arora, executive director, JD Power Asia Pacific, a market research firm. With large families, there was always a need for big seven-seater vehicles in the homes of middle-class Indians. But despite so many players, nobody could marry low price with good looks. Ertiga does that.
Now, other car manufacturers too are looking at this segment seriously. A slew of launches — from Chevrolet Enjoy to Nissan's Evalia, Ashok Leyland's Stile and Hyundai's Hexa Space are all in the works. But remember, Maruti has a clear first-mover advantage.
The MUV segment in India is currently at 16% of the total car market. But it is set to grow rapidly. In Indonesia, MPVs comprise 30% plus of the market. In China too, this segment is growing rapidly. "Their popularity seems to coincide with a changing consumer profile. Second-time Chinese buyers use their vehicles for multiple purposes like travel, family activities where MPVs serve well," says Bill Russo, president, Synergistics Ltd, a China-based consulting firm with focus on the auto sector.
India will surely follow China in the preference for MPVs. Maruti was the first one to realise its true potential and launch a product to cater to this segment.
Maruti's Magic Formulae
How does Maruti manage to do it again and again? It starts with getting the product right. Every month in 20 cities, Maruti reaches out to 10% of its new customers to find out what they like and what they don't like about their cars. About 20% of the lost customers (who came for enquiries and did not buy) are also asked why they did not buy. "This gives us enormous feedback on what our customers want and what they are looking for," says Pareek.
This is backed well by an MNC which is willing to listen and develop a car that Indian customers want. For Suzuki, unlike all other MNCs, India is the most important market and they will go the extra mile to keep its stranglehold. The next step is to get the pricing right. A senior ex-Maruti executive recalls the Alto launch in India in 2000: "We knew that the sweet spot was Rs 2.5-2.6 lakh.
But with 40% import content, there was no way the product could have been priced below Rs 3.5 lakh." Eventually, the price was fixed at around Rs 2.5 lakh with Maruti making losses on every car. But it soon pushed for localisation making this a profitable product. "Price here was always decided by Maruti and Suzuki was always sensitive to it. This made the big difference," he says. At that price, Alto became a huge success soon overtaking M 800.
Contrast that with Honda Jazz — a good product that flopped in India simply because it got the pricing wrong and the price correction came too late to make much difference. Maruti has the comfort of a big portfolio of cars in India at different stages of maturity. "It is this that gives Maruti the pricing power which others today do not have," he says.
Functional, utilitarian and lacking in aesthetics, they are mostly used as taxis and cabs for commercial purposes. At the other end are the Innova, XUV, Endeavour and Fortuner, which are aesthetically and performance wise better but are pricier (Rs 8-lakh-plus).
Amid all this, Maruti offers a well-designed and good-looking Ertiga starting at Rs 6-lakh-plus. "Ertiga has hit the sweet spot in India," says Mohit Arora, executive director, JD Power Asia Pacific, a market research firm. With large families, there was always a need for big seven-seater vehicles in the homes of middle-class Indians. But despite so many players, nobody could marry low price with good looks. Ertiga does that.
Now, other car manufacturers too are looking at this segment seriously. A slew of launches — from Chevrolet Enjoy to Nissan's Evalia, Ashok Leyland's Stile and Hyundai's Hexa Space are all in the works. But remember, Maruti has a clear first-mover advantage.
The MUV segment in India is currently at 16% of the total car market. But it is set to grow rapidly. In Indonesia, MPVs comprise 30% plus of the market. In China too, this segment is growing rapidly. "Their popularity seems to coincide with a changing consumer profile. Second-time Chinese buyers use their vehicles for multiple purposes like travel, family activities where MPVs serve well," says Bill Russo, president, Synergistics Ltd, a China-based consulting firm with focus on the auto sector.
India will surely follow China in the preference for MPVs. Maruti was the first one to realise its true potential and launch a product to cater to this segment.
Maruti's Magic Formulae
How does Maruti manage to do it again and again? It starts with getting the product right. Every month in 20 cities, Maruti reaches out to 10% of its new customers to find out what they like and what they don't like about their cars. About 20% of the lost customers (who came for enquiries and did not buy) are also asked why they did not buy. "This gives us enormous feedback on what our customers want and what they are looking for," says Pareek.
This is backed well by an MNC which is willing to listen and develop a car that Indian customers want. For Suzuki, unlike all other MNCs, India is the most important market and they will go the extra mile to keep its stranglehold. The next step is to get the pricing right. A senior ex-Maruti executive recalls the Alto launch in India in 2000: "We knew that the sweet spot was Rs 2.5-2.6 lakh.
But with 40% import content, there was no way the product could have been priced below Rs 3.5 lakh." Eventually, the price was fixed at around Rs 2.5 lakh with Maruti making losses on every car. But it soon pushed for localisation making this a profitable product. "Price here was always decided by Maruti and Suzuki was always sensitive to it. This made the big difference," he says. At that price, Alto became a huge success soon overtaking M 800.
Contrast that with Honda Jazz — a good product that flopped in India simply because it got the pricing wrong and the price correction came too late to make much difference. Maruti has the comfort of a big portfolio of cars in India at different stages of maturity. "It is this that gives Maruti the pricing power which others today do not have," he says.
Competitors also cannot match Maruti's great network of after-sales workshops that offer cheap service and cheaper spare parts to value-conscious Indians. It is a combination of all these factors that has made Maruti so successful in India. For the 12th year in a row, Maruti topped the JD Power's customer satisfaction survey among auto companies in India, a rare feat indeed.
What the Stars Foretell
Will Maruti continue to cruise ahead? There are three kinds of views on this. Some like Ramkrishnan of Frost & Sullivan feel that as the centre of gravity in Indian car market moves upwards with Indian customers upgrading from small to big cars, Maruti — the king of small cars that has failed miserably in the sedan segment — will struggle.
There is a contrarian view, however. Some feel India with a low-car penetration — 15 in 1,000 Indians own a car today — compact hatchbacks will continue to top popularity charts for a long time. And Maruti just needs to play its game better than others.
Some analysts also feel that Maruti can easily reach out to outside experts — from designers to engines — to mix and match and offer a compelling product in the higher segment, should it put its mind to it.
There is however a third view. Globally, small cars are back in fashion with rising fuel prices and environmental consciousness. From BMW to Mercedes to Ford to GM, almost everybody is looking at small cars to cater to this shift. Maruti cars could be in big demand not just in India — but globally — if Suzuki plays its cards well.
Mayank Pareek, COO (marketing & sales), Maruti Suzuki speaks about Indian car buyers, consumer loyalty and Maruti's strategy
On the Plant Lockout and its Impact
What is most satisfying is that in these trying times I have had customers who have written to me out of the blue saying they would rather wait than buy another car. We have had no cancellation so far. Considering that each customer would have paid Rs 10,000 as booking amount, it is very reassuring for us as a company. The plant will take some time to get back to its normal production capacity.
On What Makes Swift-Dzire Popular
The car has a presence on the road. Our brief to the R&D team was — it should have the looks and also the performance. These cars target the third generation of Indians who have grown post-liberalisation, have the money and want to spend. And they do not hesitate taking EMIs to buy things they want to.
On Indian Customers
"Kitna deti hai" sums it all. Fuel efficiency and monthly maintenance are important for most, even those in living in plush homes in South Mumbai and South Delhi.
On Expectations From Ertiga
We started the production of the car at 4,000 units in April and have now scaled it up to 6,000. But the waiting period is still around six months. There are around 1 million A2 segment cars that were bought in the past five years. Those customers will look to buy their next car soon. Ertiga targets them. I think MPV [multi-purpose vehicle] segment has a lot of potential in India.
On Future Launches
I see Indian car buyers split in three categories. A third of customers are first-time buyers. A third are replacing their cars. And a third are adding second car to the family stable. In psyche, the three segments think and behave very differently. We hope to tap into sweet spots in each of these segments. We are looking at these segments very closely and our product launches will reflect that.
What the Stars Foretell
Will Maruti continue to cruise ahead? There are three kinds of views on this. Some like Ramkrishnan of Frost & Sullivan feel that as the centre of gravity in Indian car market moves upwards with Indian customers upgrading from small to big cars, Maruti — the king of small cars that has failed miserably in the sedan segment — will struggle.
There is a contrarian view, however. Some feel India with a low-car penetration — 15 in 1,000 Indians own a car today — compact hatchbacks will continue to top popularity charts for a long time. And Maruti just needs to play its game better than others.
Some analysts also feel that Maruti can easily reach out to outside experts — from designers to engines — to mix and match and offer a compelling product in the higher segment, should it put its mind to it.
There is however a third view. Globally, small cars are back in fashion with rising fuel prices and environmental consciousness. From BMW to Mercedes to Ford to GM, almost everybody is looking at small cars to cater to this shift. Maruti cars could be in big demand not just in India — but globally — if Suzuki plays its cards well.
Mayank Pareek, COO (marketing & sales), Maruti Suzuki speaks about Indian car buyers, consumer loyalty and Maruti's strategy
On the Plant Lockout and its Impact
What is most satisfying is that in these trying times I have had customers who have written to me out of the blue saying they would rather wait than buy another car. We have had no cancellation so far. Considering that each customer would have paid Rs 10,000 as booking amount, it is very reassuring for us as a company. The plant will take some time to get back to its normal production capacity.
On What Makes Swift-Dzire Popular
The car has a presence on the road. Our brief to the R&D team was — it should have the looks and also the performance. These cars target the third generation of Indians who have grown post-liberalisation, have the money and want to spend. And they do not hesitate taking EMIs to buy things they want to.
On Indian Customers
"Kitna deti hai" sums it all. Fuel efficiency and monthly maintenance are important for most, even those in living in plush homes in South Mumbai and South Delhi.
On Expectations From Ertiga
We started the production of the car at 4,000 units in April and have now scaled it up to 6,000. But the waiting period is still around six months. There are around 1 million A2 segment cars that were bought in the past five years. Those customers will look to buy their next car soon. Ertiga targets them. I think MPV [multi-purpose vehicle] segment has a lot of potential in India.
On Future Launches
I see Indian car buyers split in three categories. A third of customers are first-time buyers. A third are replacing their cars. And a third are adding second car to the family stable. In psyche, the three segments think and behave very differently. We hope to tap into sweet spots in each of these segments. We are looking at these segments very closely and our product launches will reflect that.
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