Maruti to launch lighter, more fuel efficient cars from next year

Maruti Suzuki India has continued on a strong wicket despite the decline in overall domestic car market and weak exports this fiscal. But if what several analysts are saying is true, Maruti will only strengthen its position further in the coming months.

First, the impressive product lineup the company’s parent, Suzuki Motor Company, recently showacsed at the Tokyo Motor Show which outlines 14 new products in five years or roughly three each year. All these will be products - small cars and SUVs - meant for the Indian market. A story in Mint newspaper speaks of Maruti developing a rival to Toyota’s hugely successful Innova which will be launched in 2017.

Next, Suzuki has finished developing three new vehicle platform which will enable cars to be at least 15% lighter and therefore even more fuel efficient than at present. Maruti’s “kitna deti hai” obsession is sure to get magnified with vehicles which come off these new platforms beginning 2014.

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According to Suzuki’s projections, Maruti’s total sales this year will remain at last year’s level (11,72,000 units or about 1.2 million units) but will grow in double digits in the coming fiscal to 1298000 units or about 1.3 million.

Not just the domestic market, Maruti is expected to put up a great show on the export front as well since parent Suzuki will now be selling cars made by Maruti in African, Middle Eastern and Latin American markets. Maruti may set up small assembly units in markets such as Sri Lanka and Africa to expand its global footprint.

In a note to clients, Jatin Chawla and Akshay Saxena of Credit Suisse said despite Maruti’s domestic rural focus, it has been able to reach out to about 7% of total villages in India “so rural will remain a huge focus and its share can further increase from the current 30% to 50% in five years.”

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The rural market is where all the growth has been this fiscal. Maruti currently just reaches 44,000 villages but will take this to one lakh villages by the end of the fiscal. “This reach is a huge sustainable competitive advantage and a big barrier of entry for competition. Already, Maruti’s current sales network at 1,200 sales outlets and 3,000 service outlets is well ahead of nearest competitors,” the two analysts said. So competitors like Hyundai and Tata Motors have a lot of catching up to do here.

Abhijit Naik and Nitij Mangal of CLSA quoted the Suzuki presentation at Tokyo recently to say that the Japanese parent plans to further strengthen the already strong sales and marketing efforts of Maruti besides also stepping up R&D investments.

In the long run, Suzuki wants Maruti to retain about 40% share of the Indian market where almost all the top global car makers are jostling for space. That sure is a tall order but one which Suzuki is obviously gearing up to.