Maruti hits the sweet spot with Nexa

When Maruti Suzuki launched the Nexa line of dealerships last July to sell a line up of premium cars, there were many in the automobile industry who were sceptical of the strategy.

After all, the company prided itself on its range of hatchbacks whose cost of ownership was the best in class and customers did not exactly go to the dealerships for the buying experience. That Maruti Suzuki had decided to open Nexa outlets showed that it was ready to move to the next level and that it was confident of the technological and product improvements it had achieved.

The first car to be sold through Nexa outlets was the S-cross, a crossover vehicle in the ₹8.34- 13.74 lakh price range. Within a few weeks of the launch, due to a tepid response from buyers, the company cut prices. And the sceptics could almost be heard saying, “We told you so.”

You raise this issue with RS Kalsi, Executive Director – Marketing & Sales, Maruti Suzuki, and ask him about the discount and he is not unduly worried. “There are two things,” he says, “one is, you do the model pricing based on cost and after that you arrive at some value. Then, there is the customer’s perception about the price.” Kalsi admits that maybe there was a gap between the two. “We decided that we need that correction. We did the correction and post that we are getting good numbers,” he adds.

Better experience

Opening Nexa outlets is part of the company’s strategy to increase sales. The idea was to give a different kind of experience to the customer so that it is not just the product, but the way it is presented and the experience the customer goes through. This is something that he or she would experience in any other premium brand’s showroom – not just a car showroom.

This move, says Kalsi, has brought in many customers who earlier did not even look at having a Maruti car in their parking slot. “It has helped us in converting non-customers into customers,” he adds. Maruti found out that nearly half the buyers at Nexa showrooms “were not driving a Maruti car and they did not have in their consideration purchase of a Maruti vehicle”. These customers felt that Maruti was a mass brand, something they were not comfortable with. Kalsi admits the company was taken by surprise by the results thrown up in its surveys. After all, this set of customers was in its peak purchase cycle. Both husband and wife were employed and their average income was one-and-a-half times more than those who went to the company’s existing showrooms. Encouraged by the response, Maruti Suzuki opened 127 Nexa outlets in a year and plans to open another 123 more this year, taking the total to 250.

Confident strategy

After the S-cross, the company launched the hatchback Baleno through the Nexa channel; this car has a long waiting period. To give Nexa customers the same kind of service experience, Maruti is looking at opening exclusive service facilities for them in the near future.

Two more models will be sold through Nexa dealers – Ignis, a compact sports utility vehicle, and Baleno RS, with a 1-litre boosterjet petrol engine. With these four models, Kalsi believes the Nexa outlets will be viable. Through the 127 dealers, the company has sold 70,000 cars so far and it had worked out the viability beforehand.

Kalsi, who has worked over three decades in various functions at Maruti, says the company has done many things on both the technology and the products for it to feel confident that it will beat the industry’s growth estimates. In 2015-16, its sales grew over 11 per cent against the industry’s seven per cent and this financial year, it is looking at a double-digit growth again. Maruti’s confidence stems from the fact that it will have full year sales of S-cross, Baleno and the newly launched SUV Vitara Brezza, plus the fact that workhorses like the Swift and Swift Dzire continue to post good numbers. Sales of the Ciaz sedan too are growing steadily.

The Gujarat plant will go on stream in January giving the company added capacity to reduce waiting period on high-priced models and push sales. “It is not just the strength of the new models, it is also the strength of the network, sustenance of our existing portfolio, where even on high volume products we could achieve growth,” says Kalsi.

If the Southwest monsoon turns out to be as good as forecast, Maruti Suzuki’s rural sales, which grew 10 per cent last year even after a poor monsoon, will perk up. The company will steadily drive to its goal of two million sales by 2020.

COMMENT NOW