Maruti Suzuki sees buyers shifting to larger cars, but still lesser than four metres in length.
“Market is slowly shifting to bigger cars, but under four metres because of the excise duty,” Mr Shinzo Nakanishi, Managing Director & CEO, Maruti Suzuki India Ltd, told Business Line , at the auto expo in Delhi last week. That was definitely the trend, he said.
Cars under four metres in length with a 1.2-litre petrol engine or a 1.5-litre diesel engine are charged a lower excise duty.
That explains why Maruti Suzuki, known more as a small-car manufacturer, is moving into the compact multi-purpose vehicle category and hopes to enter the compact sport utility vehicle segment.
The company, which showcased a concept compact MPV at the 2010 auto expo, unveiled the vehicle, Ertiga, this year. The Ertiga will go on sale next financial year. It also displayed a concept of a compact SUV – codenamed XA Alpha – this year.
Mr Nakanishi said Maruti Suzuki would wait for customer and market feedback before deciding whether it would produce the compact SUV. “If the feedback is good, we will go ahead (and produce it). If it is not good, we will stop and have to change our direction,” he said.
COMPACT SUV SEGMENT
Industry experts believe that Maruti Suzuki would get into the compact SUV segment too, considering that a number of manufacturers are entering that space. Also, when other car-makers get into the small car space, dominated for long by Maruti, it makes sense for the market leader to get into newer segments, according to them.
Ford India unveiled its compact SUV, EcoSport, while Mahindra & Mahindra has said it will launch one in the next few months. Premier Automobiles has a compact SUV, Rio, in the market.
On Maruti launching the Ertiga, Mr Nakanishi said MPVs and SUVs accounted for nearly 3.5 lakh units a year, or 14 per cent of the passenger vehicle market. “We are losing that market and therefore we want to enter it.”
To a question, he said that last year (2011) was full of fluctuations for the automobile industry. A lot of changes happened that caught the industry by surprise. At the beginning of the year, the industry was looking at a 16-17 per cent growth. But developments in the economy and the interest rate hike impacted car financing. Almost 80 per cent of Maruti's customers go for loans to buy their cars.
Another major development was the hike in petrol prices, which increased the gap between retail prices of diesel and petrol. Customers moved to diesel engine cars, which accounted for about 23 per cent of Maruti's total sales. Manufacturers with large diesel engine making capacity have been able to capitalise on this shift, while Maruti suffers from a shortage of diesel engine capacity.
Its capacity is 2.4 lakh units a year, which will go up to three lakh shortly. The company is in talks with Fiat for buying diesel engines. It hopes to get at least 5,000-10,000 diesel engines a month, which will help it boost its diesel car sales.
Mr Nakanishi said the company would wait for a clear policy signal from the Government before stepping up its investments to make diesel engines.
The car market was looking up, especially in December when Maruti's retail sales were 116,000 units, although its wholesale numbers were down. “December sales were the highest this year.” Network stock (vehicles with the dealers) was down to less than 15 days, which was good from the dealers' health point of view, he said.
Maruti expects sales of its hatchback A-star to Nissan (which is sold as Nissan Pixo in overseas markets) will be lower than last year. In 2010-11, it sold 50,000 units of the A-star to Nissan, which will be down to about 30,000 this year. According to Mr Nakanishi, Nissan has not yet indicated the numbers for next year.