Maruti Suzuki is Embarking on a New Strategy. This time, it’s a Rare Ritual. The Company calls it the “Kizashi”. We call it “The Newest Shot at Growth”
When all competitors around Maruti Suzuki have seemingly started taking its dominance in the compact car segment to heart (the A2 segment, where the Indo-Jap carmaker enjoys a market share of 55.03%, having sold 369,466 units during Q1 & Q2, FY2010-11), the Indo-Jap has begun doing the right thing – take a peep into their world too! Call it a sign of great things to come or simply a fanatic anti-competitive rhetoric, but this fierce advocate of Indian consumerism has decided to take the plunge to ensure that its 50% market share doesn’t go anywhere. Many even view this decision by Maruti as a visceral fear of change, but left it was with little choice. Despite flooding the domestic market with offerings at the lower to mid-price points in the A2 & A3 segments (with brands like Alto, Wagon R, Estillo, Swift, A-Star in the A2 and SX4 and Dzire in the A3 segment), its passenger car market share fell below the 50% mark (touching a low of 45.7% during Q1 & Q2, 2010) for the first time since it started dominating the market with its 800 magic more than two-and-a-half decades back. Reason – competitive pressures, with everyone from the mighty truck-making General Motors and Fords to the premium sedan-rich Nissans and Skodas taking an elephant ride on Maruti’s hunting ground. Even the number of offerings in the A2 and A3 segments have increased by 24 in just the past two years, to 46 (as of date)! Given the circumstance, trying its hand at the A4 segment remains the hope that can help Maruti salvage lost pride. Kizashi is at that hope’s vanguard.
Yet, one hesitates to read too much into this Maruti dream, which is fuelled by the Indian consumers’ desires to grow fast on the social scale. Yes, the 350 million middle-class (that is, if you were to define the typically quasi-rich classes as the middle class; as India in reality has no true middle class) still believe that Maruti as a brand stands for the power of delivering a value-for-money Jap engine, a well-in-place architecture and an extremely affordable and readily available service (centres). But is the Kizashi what this Indian consumer class is waiting for? Mayank Pareek, the Marketing Chief at Maruti Suzuki believes the answer is yes, and tells 4Ps B&M, “The new age Indian consumer has evolved. Today, they demand more, and we are starting to deliver what they are demanding...” Says Alex Mathews, Research Head, Geojit BNP Paribas to 4Ps B&M, “The market for premium sedans is growing at a slow pace in India, but the (future) opportunities in this segment are strong. This is because Indian households with annual disposable incomes of $5000 -$15,000 as a percentage of total households, is expected to reach 41.1% in our country by 2020 as compared to 14.6% in 2010.”
For the compact-car loving Indian (who stands impressed by the Bolly star Ranbir Kapoor’s Nissan Micra claims or by Yuvraj Singh’s off-the-pitch Fiat Punto promise), Rs.12 lakh+ (on-road) A4 segment offerings have not fit the bill historically. But truly, history need not repeat itself in the current times, as consumer perception could well be changing. Yet, the Kizashi has respectable and much dreaded competition in its category. Especially the lower-priced Honda Civic or a GM Cruze or even a Skoda Laura. Add to all this another factor – the danger that the Maruti tag remains associated with the premise of being “affordable” – and you have the making of a very interesting marketing conundrum.
Maruti Suzuki has been here and done that. In the sense, they have some valuable experience in this segment. The Grand Vitara had made for a case for Maruti Suzuki’s premium dreams in the past. But currently, after five years of the SUV’s existence in the Indian market, it commands a share of 0.06% in its (the SUV) segment (Q1 & Q2, FY2010-11). The Indian consumers bought 307 units of the “all-petrol” Honda CR-V during the two quarters ending September 2010 (a y-o-y rise of 184.26%), while the Suzuki Vitara, which is also available in the diesel version, sold 49 units during the same period (a y-o-y decline of 20.5%!). The underlying perception complication could also be that while Suzuki and Maruti Suzuki are two different companies in reality (with common holding), for the masses, Suzuki is Maruti, and any product, by either name, would be seen against the checklist of value-for-money (read, ‘is it cheap?’). And Grand Vitara particularly so, did not qualify on that basis. Says auto expert Murad Ali Baig, “When it comes to luxury cars, somehow, Maruti Suzuki is considered low-priced. It is the same reason why Volkswagen & Fiat sell the Audi and Ferrari respectively as premium brands – rather than the Volkswagen Audi and Fiat Ferrari. For that matter, not many call the Lexus a Toyota Lexus!”
Irrespective of this, if the Kizashi were expectably successful, would it be able to change the overall auto market share percentages of Maruti Suzuki? The answer is a no because of the sheer low volume of sales in the A4 segment. Even if Maruti’s new launch were to capture 100% of the existing volumes in the A4 category – which is a highly unlikely situation when you are talking about one of the world’s largest selling sedans ever (Toyota Corolla) and the most attractive launches in the past four years (Honda Civic and Chevrolet Cruze) as category competitors – it would only be able to increase its overall passenger market share by 2.84% (estiamtion based on sales figures for Q1 & Q2, FY2010-11).
For the sake of ensuring a diverse range of offerings, Maruti does need to exist in every possible segment. Considering that argument, the Rs.12 lakh+ priced and 2.4 litre petrol-driven Kizashi does carry some weight. But it will need quite some marketing gumption to make its presence felt. In 1999, when Maruti Suzuki’s Baleno tried to make some space in the A3 segment, it failed the test. Seven years later, the product had to be replaced with the now-successful SX4. Today, along with the Dzire, the A3 market share of Maruti stands at 36.14%, while the closest followers (Tata Motors and Honda) with 26.23% and 14.04% market shares respectively, are still some yards behind Maruti’s tyre marks. If history repeats itself, and even if Kizashi gets moderate success, it will read well for Maruti, most importantly because the Kizashi – which looks fantastic and has post-modern designs one would kill to own – can influence a multiplier effect on the other segments’ sales of Maruti’s cars and also on the overall image positioning of the firm. As for us, we’ll keep watching!
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