Indian Autos blog

We followed the Suzuki-VW relationship quite closely right from its inception as we expected great things out of it.

However, things did not go as we would have hoped. If you have been following the auto industry with a keen eye, you are well aware that Suzuki has decided to part ways with VW. The implication of the break up is quite clear – Suzuki has signed an agreement with Fiat for the supply of Fiat’s 1.3-liter Multijet four-cylinder to Maruti Suzuki.

The kingpin of the small car market – Maruti Suzuki is sensing a strange rearrangement in the Indian car market. The largest car market in India believes that the India is matured enough to demand larger cars. Maruti Suzuki believes that the average Indian consumer wants big cars but still less that four meters because of the excise benefits.

Sensing this shift in demand, the company is moving on to much bigger products in its portfolio. The Dzire CS, essentially a sub 4 meter Swift Dzire based on the new Swift, is ready to be launched in the first week of February. The Ertiga MPV showed its skin at the 2012 Auto Expo and also looks pretty much ready for launch.

Fiat’s Multijet diesel engine has worked wonders for many manufacturers in India. But if you had to pick one from the lot, it has to be Maruti Suzuki. The king pin of the small car market has gained maximum benefit from the Multijet diesel.

Currently, with sky rocketing petrol prices, Maruti Suzuki is selling 8 diesel cars for every 2 petrol cars – yes the split of Diesel to Petrol is a whopping 80-20, its also the national average.

Strengthening the ties further, Maruti Suzuki has finalized a deal to buy 1 lakh diesel engines from Fiat every year. With this deal, the company hopes to reduce the waiting period on its diesel cars.

Right now, the company is in a very sticky situation where it has a surplus of petrol cars but no capacity for the diesel ones. Most of its best selling models in the diesel avatar such as Ritz, Swift Dzire, SX4 and Swift have waiting list stretching for more than 6 months.

This deal will also help Maruti Suzuki in the future as it plans to expand its capacity to reach 1.75 million annual capacity. It has already started the process of acquiring land for the new plant in Gujarat.

There was a time in the history of the Indian automotive scene when ‘Maruti’ was a by word for a car. If you wanted a family car, you would buy the 800. If you wanted to flaunt your new riches, you bought an Esteem. If you had a big family, you would buy two Esteems. Those were the days when the international manufacturers did not give a damn about the Indian automotive scene.

However, things change and so did the Indian automotive scene. People started earning a lot and more importantly spending a lot. Their disposable income grew. International automotive brands, right from commuter brands to super luxurious ones, started to take the Indian automotive scene seriously. Many manufacturers from US, Germany to Japan invaded the Indian market and started eating up into Maruti Suzuki’s market share.

The company, famously known to control more than 60% of the passenger car market started bleeding its market share to the competition. Last month saw Maruti Suzuki’s market share dropped to its all time low of 40.3 percent. Within a year, Maruti Suzuki lost almost 4 percent of the market to its competitors. If you want to compare it on a much broader time scale, Maruti Suzuki had a 55.5 percent market share in 2000. This means Maruti Suzuki lost a startling 15.2% of the pie within a decade.

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July has been a dull and damp month for car sales in India. Rising petrol prices combined by rising interest rates made sure that the Indian market met with a decline of 16% as compared to July last year.

Every manufacturer took a hit on their sales figures. Of course, the bigger players got hurt more than the smaller ones. Maruti Suzuki, the largest player in India in India was hurt quite badly.

Maruti Suzuki sold only 75,300 vehicles in July compared with 100,857 units a year earlier. Because of the decline in sales the company’s dealers had an inventory pile up leading to a lot of funds being stuck in operating cost.

Maruti Suzuki finally decided to cut the production of its high volumes models such as Alto, WagonR, Estilo and Ritz to rationalize the inventory. To keep the inventory at normal levels, Maruti has tweaked production plans.

This is the highest drop in car sales in the last two and a half years. However, Maruti Suzuki believes that this is only a short term decline and the demand will catch up in the festive month of September. The company has enough inventories to cope up with the festive demand.

Maruti has lined up three products – Swift, Swift Dzire and R3 MPV for the next six months for introduction.

The big daddy of the Indian car Industry is flexing its muscle to gain back what it has lost in the last couple of years. Maruti Suzuki has been facing intense heat from the competitors in the past few years. Although, it has successfully managed to retain the top spot, the competition is only going to get stiffer. Clearly, this is no time to fold your hands and follow the ‘wait and watch’ strategy.

The major reason where Maruti is loosing out on is product launches. The last launch from Maruti Suzuki was the Kizashi in February 2011 and the product bombed quite badly. So Maruti Suzuki has decided to opt in for a ‘hands on’ approach in the market. By that we mean, it is investing a whopping 3,000 crores in 2012-13 financial year on various areas, including expanding capacity and new model launches.

The few products that are expected from Maruti’s stable over the next couple of years are:

• New Swift (on August 17, 2011)
• New Swift Dzire which will be based on the new Swift but will be shorter than the current Dzire.
• R3 MPV to challenge the Toyota Innova
• Small car below the Wagon R by end of 2012
• Next generation SX4 in 2013
• A-Star facelift by 2013
• Ritz facelift by 2013

These are the product that we are 100% sure of. Of course, there will be some facelifts and a few ‘special edition’ models (read stickered models) in the pipeline as well which cost a few bucks to

Of course, after developing these models, MSIL needs to build them at some place. So they are investing about Rs 4,000 crore in this fiscal primarily on setting new assembly lines inside its Manesar facility with an annual capacity of 2.5 lakh uints. The company is also increasing the production capacity of diesel cars to 2.9 lakh units annually from existing 2.4 lakh units.

By the looks of it, Maruti Suzuki is certainly stepping on the right stones for the future.

What do you think about these plans?

The ‘Big Car Churning’ machine has finally hit the brakes. Maruti Suzuki, after 2 years of dominating growth, has experienced a decline in sales because of labor strike that hit the company in June. Maruti last showed a drop in sales in December 2008.

The ‘Small Car’ czar had to stop production for 11 days as 2,000 workers at the Manesar went on strike because their demands of recognizing them as a new union was not met. Maruti Suzuki suffered a loss of 93 million dollars and 12,500 units of different models were not produced at all.

Initially, when the strike began, the company said that it had enough inventories to factor in the strike but later Maruti Suzuki chairman RC Bhargava announced that there will be ‘a considerable delay’ on all the diesel models. The launch of the new Swift was also delayed because of the same strike.

Adding to the misery, the company had to shut its plant for the next 6 days for annual maintenance of the machinery. That’s a total of 16 days of no production at all!

Further, the passenger car segment also showed signs of a slowdown with only 17% growth as opposed to 31% last year in the same period. So a ‘triple shock’ meant even the biggest automaker had to drop its weapons. Although, this decline will be temporary one as production has resumed in full swing. Maruti will bring the new Swift, new Dzire and R3 MPV to the market next.

It’s not the first time we’re hearing about auto manufacturers reaching out to Gujarat for putting up a plant. We’ve heard stories about Hyundai and Ford’ interest in investing in Gujarat last year. Tata Motors produces Nano from Sanand while GM India rolls out vehicles from Halol, both places situated in Gujarat. The new company to join the Modi-led Gujarat bandwagon is Maruti Suzuki. DNA Money reports that a delegation  [ Read More ]