Premium end of compact cars set to grow

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Maruti Suzuki, the country’s largest car manufacturer, today unveiled the second compact car, the Ritz, which is priced at Rs 3.90 lakh for the entry-level petrol variant. While the petrol variants have been priced between Rs 3.90 lakh and Rs 4.80 lakh, the diesel variants cost between Rs 4.65 lakh and Rs 4.99 lakh. The prices are introductory and ex-showroom Delhi, the company has said.

The pricing of the model will directly make the Ritz battle head-on with the company’s other compact car model — the Swift — which is available in the price range of Rs 3.99 lakh to Rs 5.19 lakh ex-showroom in Delhi. The company admits that this would lead to an 8 per cent to 9 per cent cannibalisation of the Swift customers.
 

Mayank Pareek, senior vice-president, Maruti Suzuki, said: “We expects an 8-9 per cent cannibalisation of the Swift’s sales once the Ritz is made available at dealerships.”

The Ritz will also take on the Hyundai’s Getz (priced Rs 4.74 lakh to 5.36 lakh), and will face tough competition from new players coming in the upper end of the compact car market. The new players include Honda’s Jazz, which will be launched next month, Volkswagen’s Polo (launch slated for the beginning of next year) and Fiat’s Grand Punto, among others that will all jostle for space in the premium compact car segment.

Market analysts say pricing the Ritz in the same range as the Swift is part of the Japanese company’s strategy to ensure that customers looking for a premium compact car have enough choices within the Maruti Suzuki stable and have no reason to move out to other manufacturers. “India is a compact car market. No two customers are alike. Their needs are different. We do not want to miss out on an opportunity. We’ll occupy every segment in this category,” said Shinzo Nakanishi, MD & CEO, Maruti Suzuki India, at the launch of the Ritz today. Pareek avers: “To be market leader, you have to be everywhere. So we’ll consider the premium end of this compact segment for future models.”

Car manufacturers like Maruti Suzuki see the top end of the compact car segment or the A2-plus segment to grow in the coming years as more car majors line up models targeting this premium segment. “When we launched the Swift way back in 2005, it was a new segment. At that time, we sold about 2,000 units of the Swift per month. But now we sell around 10,000 units on an average per month. This is the kind of growth this segment has achieved in the last four years,” said Shashank Srivastava, chief general manager (marketing), Maruti Suzuki India.

The total compact car segment comprises about 70 per cent of the total number of cars sold each year. Of this, the premium end of compact cars (which includes the Swift, Hyundai’s i10 and i20, and Skoda’s Fabia) command about 17 per cent of the market share.

Srivastava said, between 2004 and 2009, the cumulative growth growth of the total compact car segment stood at 16 per cent, while at the same time the A2-plus segment grew an impressive 26 per cent.

“Customers are ready for this segment and to pay a premium for feature-packed small cars. These are third-generation buyers who are used to the comforts of a sedan, but opt for premium compact cars, since it has become the fashion statement in the West,” says Pradeep Saxena, vice-president (automotive) of TNS Global.

While Maruti’s Ritz, sporting the K-12 petrol engine, becomes country’s the first BS IV-compliant engine, the model also complies to European standards in terms of using environment-friendly spare parts. Pareek said making the Ritz compliant to European standards added 8 to 10 per cent to the cost.

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