Car market leader Maruti Suzuki India Ltd. (MSIL) is looking at nearly doubling the number of models to 25, including its entry into Sport Utility Vehicle (SUV) and Light Commercial Vehicle (LCV) segments, as it aims a sales target of 3 million cars annually. The company is also set to launch mid-sized sedan Ciaz to replace the SX4.
The company will launch within a few months an SUV to compete with Renault’s Duster, which will be followed by a compact SUV in 2016 to take on segment leader Ford EcoSport, as part of a strategy to be present in newer segments of the passenger vehicle market.
Maruti Suzuki, which is gearing up to launch a Light Commercial Vehicle, is also in the process of setting up a separate network for its new foray.
The company, which is putting up a new plant in Gujarat that will have a total annual capacity of 1.5 million units, sold 1.16 million units last fiscal.
“To sell 3 million cars (annually), we need to have at least 25 models. With 12 to 15 models we would not be able to sell 3 million cars,” Maruti Suzuki India Chairman RC Bhargava told PTI in an interview. The company currently sells over a dozen models, starting from entry level Alto 800 to Multi-purpose Vehicle Ertiga.
He said only market would determine by when the company could touch the 3-million mark.
“We will be present in SUV segment in few months from now, a model which will be competing with Duster in that size. It has to be something which can compete with the Duster, and in 2016 we will have a compact SUV under 4 meter, so that it gets benefit of lower excise duty and which will be in the same segment as Ford EcoSport,” Bhargava said.
Both the SUVs will be available in petrol, diesel and CNG options, he added.
He further said: “So at that time, we will also be competing in the full 100 per cent of the car market and not 79 per cent as we are doing currently.”
Underlining the need for Maruti to have a full play in all the segments, Bhargava said: “Last year we had a market share of 38.9 per cent, and this year till date we have 44.4 per cent, which is out of only 79 per cent of the total market as we are not present in the SUV segment now.”
When asked about the overall investments required to have 25 models, he said the company hasn’t arrived at a figure yet as it was being worked out.
With the upcoming launches of the SUVs and LCV, the full annual production capacity of 1.5 million units from the Manesar and Gurgaon plants is expected to be utilised by 2015-16, he added.
MSI has completed expansion in Manesar and now the total annual capacity is 1.5 million units.
“Last year we produced 1.2 million (units). So there is gap of 3 lakh cars, which we can add. We think that this gap will fill in 2015 and 2016, partly because of the growth of the market but also because of SUVs forming an extra range of production beyond the cars which we are doing...,” Bhargava said.
On the LCV, he said: “We are bringing in one ton LCV, which is in the same segment as Tata Ace and Mahindra Gio and Ashok Leyland’s Dost. This is our first commercial vehicle product.”
MSI will have a separate sales and service network for the LCV.
“We are in the process of setting up sales and distribution network for LCV because you can not sell LCVs and cars from the same outlets. The customers are different, facilities required are different,” he said.
When asked about MSI’s inability to make a mark in the bigger segments, he said: “We derive our technology from Suzuki. I have no independent way of making cars other than the Suzuki technology. They do not get into the big car market.”
Maruti Suzuki will also soon launch mid-sized sedan Ciaz to replace the SX4.
“We are up to the level of Honda City. The car, which is next coming out Ciaz, is of the Honda City segment, that’s it. That’s our ceiling,” Bhargava said.
Commenting on the market situation, he said: “I am seeing some sort of positivity in the market, in terms of footfalls, enquiries coming in and conversions happening.”
In the first five months of this year, the company’s sales have seen 15 per cent growth. Last year during this time, it was flat, he added.
On festive season sales expectation, he said: “We expect a good festival. We expect 10 to 15 per cent upside during festival....We are quite bullish. In this month we may be growing about 30 per cent.”
Bhargava said the government’s decision to extend reduced rate of excise on cars till December-end has definitely helped the auto industry.
When asked how the rising diesel fuel prices has affected sales, he said there is already a decline taking place in the percentage of diesel versus petrol cars in the total market.
Bhargava said the rising diesel price and high cost of acquisition could limit sales of company’s entry level car to be powered by an 800 cc diesel engine which is being developed.
“Most of those cars will be petrol cars unless somebody is able to lower the cost of a diesel car because the difference between the cost of a petrol and a diesel car is such that for the entry level customer, who is not going to run his car more than 8,000 to 10,000 km per year, a diesel car is unjustified for,” Bhargava said.
The MSI Chairman, however, said the entry level segment is going to grow now as the economy picks up.
“That’s the segment, there are 120 million two-wheeler owners, all aspirants, to own a car and they would buy a car as soon as they can afford it,” he said.