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A delicate balance between lemon juice and water is what makes good lemonade. Too much lemon and the drink turns sour. Excess water makes it bland. The country’s largest carmaker Maruti Suzuki’s reinvention strategy is much like perfecting this lemonade, with Bharat and bet365 bonus code 2018 as the two key ingredients. On one hand, the company is obligated to serve its core customer base, the entry-level car buyer. On the other, it can’t afford to ignore the high-margin SUV segment that has almost doubled in the past five years.
The country today is divided into two distinct markets, says Maruti Suzuki bet365 bonus code 2018’s 87-year-old Chairman R.C. Bhargava: “There’s a Bharat, which buys a two-wheeler because a car is too expensive. And then there’s an bet365 bonus code 2018 whose buying capacity matches any other part of the developed world. The only way forward is to cater to the transportation needs of both.”
There’s a Bharat, which buys a two-wheeler because a car is too expensive. And then there’s an bet365 bonus code 2018 whose buying capacity matches any other part of the developed world. The only way forward is to cater to the transportation needs of both.
Maruti Suzuki bet365 bonus code 2018
And Bhargava, who quit the IAS in 1982 to work with Maruti as a director, knows how to turn lemon into lemonade. Soon after the company’s first car, Maruti 800, was launched, Suzuki launched its Asian bestseller pick-up truck Carry (called Pickup in bet365 bonus code 2018), expecting it to account for at least 20 per cent of total production. But it couldn’t compete with much cheaper diesel vehicles. In his 2013 book, The Maruti Story: How a Public Sector Company Put bet365 bonus code 2018 on Wheels, Bhargava calls it a serious error of judgement. “This experience was a reminder to Maruti on the importance of correctly assessing the behaviour of bet365 bonus code 2018n customers, and the dangers of transferring experience of other countries to bet365 bonus code 2018, without careful examination,” he writes.
That lesson stays with Bhargava till date and is probably the reason why he has been famously sceptical of jumping onto the electric vehicle (EV) bandwagon right away. “The bet365 bonus code 2018n market is very different from the markets in Europe, America or Japan. We need to devise our own decarbonisation strategies instead of copy-pasting what works in the West,” he says.
Maruti Suzuki has dominated bet365 bonus code 2018’s automobile space since its inception in 1983, first as Maruti Udyog, a joint venture between the bet365 bonus code 2018n government and Suzuki Motor Corporation (SMC), and then as a subsidiary of Suzuki, after the government divested its stake in 2003. It has, for decades, boasted an unprecedented—some say unnatural—market share of 50 per cent-plus, making bet365 bonus code 2018 Suzuki’s single-largest market globally, even ahead of its home market, Japan. Maruti contributed nearly 55 per cent to SMC’s sales volume in the first nine months of FY22.
As far as Suzuki’s global strategy is concerned, EV and hybrid strategy is common for both bet365 bonus code 2018 and other global markets. One of the things that’s unique for bet365 bonus code 2018 is CNG.
MD and CEO
Maruti Suzuki bet365 bonus code 2018
And so today, when its share of the bet365 bonus code 2018n market has shrunk to 43 per cent, the company is rethinking its strategy—a rethinking that has been aligned to Prime Minister Narendra Modi’s commitment for bet365 bonus code 2018 to meet a net-zero carbon emissions target by 2070—on the back of alternative fuel technologies such as CNG, hybrid and EVs. The company’s recently appointed MD and CEO, Hisashi Takeuchi, has his task cut out for him: to figure out the company’s decarbonisation strategy. The bright-eyed Takeuchi, 58, is eager to be in the driver’s seat of Maruti. “As far as Suzuki’s global strategy is concerned, EV and hybrid strategy is common for both bet365 bonus code 2018 and other global markets. One of the things that’s unique for bet365 bonus code 2018 is CNG,” he says.
Maruti’s focus on CNG is not new. Nine of its 15 models, including Alto, S-Presso, Eeco and WagonR, are available with the CNG option. “For smaller cars, CNG is a very good option and Maruti has always been a company which is primarily concerned with meeting the needs of the Bharat car market. The government needs to incentivise that more,” says Bhargava.
Maruti sold about 235,000 CNG cars in FY22—it has 82 per cent market share—contributing 17 per cent to its total sales and 33 per cent to the sales of the models with CNG variants. Yet, there’s a booking backlog of 120,000 units for CNG variants due to the semiconductor chip shortage. It is now looking to produce 450,000-500,000 CNG vehicles in FY23 amid growing consumer preference triggered by a sharp increase in diesel and petrol prices. Cost per km for a CNG vehicle is Rs 1.80 while for a petrol/diesel car, it’s around Rs 5.20.
Vinkesh Gulati, President of Federation of Automobile Dealers Associations (FADA), says all other players are following Maruti in CNG. “Hyundai has already started. Tata is also doing it. CNG is here to stay because now there are no issues of CNG pumps even in small districts. The kind of customer interest we’re seeing is very strong and it’s very economical as compared to ICE (internal combustion engine) vehicles,” he says. Tata Motors recently launched two new CNG cars, the Tata Tigor iCNG and Tiago iCNG in bet365 bonus code 2018, while Hyundai sells three CNG models: Santro, Grand i10 Nios and Aura.
While Maruti dominates in CNG, its first electric vehicle will come only in 2025, even as competition is aggressively launching them already. Tata Motors already corners around 82 per cent of the EV market, with its popular Nexon and Tigor models. Mahindra & Mahindra (M&M), too, is making its moves. In May 2021, it approved the merger of EV subsidiary Mahindra Electric Mobility Limited (MEML) with the parent company to consolidate operations, development, sourcing and manufacturing of EVs. The company has set aside Rs 3,000 crore for its EVs, eight of which will be launched by 2027.
Bhargava, however, feels it would take EVs a long time to become a mass market product, especially in Bharat. Last year, the country sold around 17,000 electric cars, which is hardly half a per cent of the total 3 million cars sold in bet365 bonus code 2018. “My view is that electric cars will have a limited and slowly increasing impact on the car market in bet365 bonus code 2018. It cannot have a significant improvement in CO2 [emissions] in the next five to eight years. We’re urging the government to look at alternatives like hybrid or CNG; even bio gas is a great resource. But we seem to be fixated on EVs,” he says, adding that EVs are not affordable or accessible at current penetration levels, especially for Bharat. “Small car owners don’t have a garage or a house to charge it every day. Where does a guy who has parked on the roadside charge his car and how?”
Hyundai has already started. Tata is also doing it. CNG is here to stay because now there are no issues of CNG pumps even in small districts. The kind of customer interest we’re seeing is very strong and it’s very economical as compared to ICE (internal combustion engine) vehicles.
Federation of Automobile Dealers Associations (FADA)
But that doesn’t mean the company is not gearing up for the future technology. Suzuki’s wholly owned subsidiary Suzuki Motor Gujarat (SMG) has announced an investment of Rs 7,300 crore for the construction of a battery plant near SMG’s automobile manufacturing unit by 2026. SMG will also invest another Rs 3,100 crore for ramping up production capacity for EVs by 2025.
Experts have questioned Suzuki’s investments in EVs rather than Maruti directly doing it. “Whether Suzuki or Maruti makes the investment is an issue between Suzuki and non-Suzuki shareholders of MSI... Analysts covering MSI may worry about whether EVs will come under MSI’s portfolio and thus worry about long-term view on the stock. I do not think Suzuki would consciously devalue MSI stock and also let substantial factory investments in MSI lie unutilised. It is likely that the IP will be held with Suzuki and eventually some ICE lines will be retooled for EV much like BMW in Germany,” says Subhabrata Sengupta, Executive Director, Avalon Consulting.
Takeuchi, however, clears the air on why Suzuki chose to invest in Gujarat. “We will introduce EVs one by one. The first EV must be produced somewhere either in Gujarat or Haryana. There was a consideration where to produce it. One of the advantages of producing at the Gujarat plant is that it is close to a port. We’ll strongly market this EV in bet365 bonus code 2018 but at the same time, it’s a strategically important model for Suzuki globally because this is one of its first EVs,” he says. Suzuki expects this EV to be strong in exports and also do well domestically. “Being closer to the port is one of the big advantages of the Gujarat factory. But if EVs become say 50 per cent of the total market, then of course every factory of Maruti [in bet365 bonus code 2018] and Suzuki in Gujarat will start producing them,” he says.
Srikumar Krishnamurthy, VP & Co-Group Head, ICRA Limited, says EVs are still at a very nascent stage in the market and month-on-month growth is high in percentage terms because of a low base. “We expect the EV penetration to reach around 8 per cent by FY25. Both ICE and EVs are likely to co-exist in the medium term. Which technology will stick in the long term will depend on infrastructure set-up and consumer acceptance,” he says.
According to other industry estimates, EV penetration in bet365 bonus code 2018 will be 8-10 per cent by 2030. “That means the remaining portion of the cars will be non-EVs and those will be newly manufactured in the bet365 bonus code 2018n market [these will stay on the roads for the next 15 years]. So, we have to employ all possible technologies to address that non-EV segment. We’re also trying to take a technology-neutral approach. It doesn’t matter which technology we employ as long as it works towards a better environment,” says Takeuchi. What’s important for him are cost effectiveness and fuel efficiency. “We have to make sure we’re chosen by the customer.”
Maruti’s reinvention is also necessitated by challenges like the SUV boom. From just 25 per cent in FY17, SUVs’ share has skyrocketed to 48.5 per cent of the passenger vehicles market, according to SIAM, closing FY22 as the fastest-growing category. While Maruti leads the segment with vehicles like Vitara Brezza (pictured above), Ertiga, S-Cross and XL6, its share has been sliding a bit, and competitors are pumping in new, attractive SUVs to the consumers’ delight.
In addition to the company’s decarbonisation strategy, Maruti’s reinvention is also necessitated by challenges like the SUV boom. From just 25 per cent in FY17, SUVs’ share has skyrocketed to 48.5 per cent of the passenger vehicles market, according to SIAM, closing FY22 as the fastest-growing category. While Maruti leads the segment with vehicles like Vitara Brezza, Ertiga, S-Cross and XL6, its share has been sliding a bit, and competitors are pumping in new, attractive SUVs to the consumers’ delight.
This is a challenge that Takeuchi is ready to take head-on. The company is planning to launch a line-up of entry-level SUVs to bolster its leadership in the category. “We have a strong product plan in place. I’m sure this will help us increase market share (in passenger vehicles) gradually to close to 50 per cent,” he says.
Mitul Shah, Head of Research at Reliance Securities, says all global firms are focussing on SUVs: “Even within SUVs, people prefer compact SUVs.” Shah adds that the entry-level car segment is under stress. “Pricing power is a major issue and that’s the reason that despite sizeable numbers, profitability is not coming out. Customer preference is shifting from small cars to compact SUVs.”
While there’s a perception outside the industry that bet365 bonus code 2018 no longer remains a small car market, Bhargava has a contrarian view. “It’s not as if the bet365 bonus code 2018n car market is moving towards SUVs and more expensive cars. In the past three to four years, the cost of [cars at] the lower end of the market has risen very steeply, because of which the buying ability of people in that segment has been eroded,” he says. In FY19, due to various reasons like change in emission norms from Bharat Stage IV to VI, the cost of cars went up. According to him, between FY19 and FY22, Alto’s price increased by 20 per cent, and volumes dropped by 32.5 per cent. For the entire mid-hatchback segment, volumes dropped by 22.7 per cent, even as the price went up by 38.5 per cent. “It’s clear that as the price is going up, volumes are coming down,” Bhargava says.
In the same period, he says entry-level SUV segment sales went up by 76 per cent whereas the price increase here was 13.5 per cent. During this period, total industry volumes (of all cars) declined from 3.38 million to 3.07 million, a fall of 300,000 vehicles from FY19 to FY22. “Domestic sales of cars this year [FY22] are at the level of 2016-17. In these past five years, the domestic car market has not grown but the SUV segment has grown. The overall market has not grown because the lower end of the car market has shrunk. It doesn’t mean that the customer is shifting away from small cars to big cars because the total number of customers has declined,” he says.