Maruti's market share is up for grabs. Hyundai, Honda, you ready?

How investors feel about Maruti’s ongoing labour dispute is clear from the stock’s price: shares of India’s biggest car maker have crashed by almost 13 percent ever since the first strike took place in early June.

Concerns about its production facility taking a hit has raised serious concerns about the company’s operations, with the fractious workers’ strike continuing for the past four months. The current 15 day-strike, which was supposed to have ended this morning, restarted after a new rift arose between the management and the workers.

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All this just as the festival season gets underway in full swing. Market leader Maruti needs to do something quickly before other car manufacturers start eating into its market share. The company, whose share shrunk to just 40 percent of the car market in September because of production disruptions, has to contend with a range of new models launched by its rivals.

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The biggest challenges will come from Hyundai’s small car, Eon, and Honda’s Brio.

Some analysts expect the Eon to shake up the entry-level segment of the compact car market. LKP Securities predicts the Eon will snatch almost 6 percent of Maruti’s share in that segment, given Hyundai’s extremely aggressive pricing (Rs 2.69 lakh).

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Better space, higher mileage, good looks and a price difference of about Rs 30,000 to Rs 35,000 between itself and the Alto will help dent Maruti’s market share in the market, said the report.Of course, not everyone agrees. First Global, for instance, thought that Eon would not have a significant impact on Maruti’s sales although it acknowledged that the Eon could grab 2-3 percent from Maruti’s share and reduce the company’s pricing power.

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Hyundai said it plans to sell approximately 1.5 lakh units a year and increase its market share to 20 percent by March 2012 from the current 18.3 percent.

Hyundai is not the only one honking behind the wheel to get past Maruti, Honda’s right behind. With a starting price of Rs3.95 lakh, the nifty Brio is expected to pose a stiff challenge to Maruti’s Swift.

What does this mean? It means that if Maruti is not careful, Alto, the undisputed king in the entry-level segment of the car market, might soon have to relinquish its cherished throne as the best-selling car in this segment.

The strikes have cost the company up to Rs 1,500 crore and the state government Rs 350 crore in revenues, according to a Firstpost article .

Maruti needs to step on the accelerator with its plans to fend off the competition. For now, other car makers can rejoice and benefit as the festival season kicks in. Maruti’s loss could very likely lead to Hyundai and Honda’s gains.