Can the new Alto 800 help Maruti ride out the storm?

The new model, to be launched tomorrow, comes at a time when the carmakers market share in the entry segment has been dropping

When sales of a car which contributed as much as 30 per cent to its overall volumes declined by a fifth over a span of six months, Maruti Suzuki was worried.

But the market leader in the passenger car market has decided to fight back and put on road a redesigned and re-engineered version of the Alto 800.

“Consumers today are looking for more features and ways to climb up the value ladder. While we have the Alto K10 at the upper end, we decided to refurbish the standard 800 cc version to attract the entry-level buyer who bring in as much as 60 per cent of sales for the car,” says Manohar Bhat, vice-president (marketing), Maruti Suzuki India Limited (MSIL).

Maruti Suzuki sells Alto in two avatars – 800 cc and a 1000 cc K –series engines. As much as two-thirds of the sales come from the 800 cc version, which is now going to be replaced with the upgraded model. The company has invested Rs 470 crore along with its vendors on the new car which, the company hopes, will revive its sagging fortunes in the small car segment.

The new Alto 800 – slated for launch on Tuesday – will sport an array of changes. The car has strapped on a new 796-cc petrol engine, which is 15 per cent more fuel efficient than the outgoing model. The revamped Alto has a more contemporary exterior design. The interiors have been overhauled with dual tone upholstery and offer an additional 15 mm rear leg space. While airbags have been added as a safety device, the tall boy design increases headroom by another 15 mm. Maruti Suzuki is mulling a CNG variant for the buyer concerned about rising fuel costs.

Industry sources indicate the car is expected to be priced upwards of Rs 2.5 lakh. Its nearest rival the Hyundai Eon comes at Rs 2.74 lakh-Rs 3.76 lakh (ex-showroom, Delhi). The new Alto delivers a mileage of 22.74 kmpl as compared to 21.1 kmpl of Eon.

Alto, which has been the best-selling car on Indian roads for eight years now, has seen sales slowing in recent times due to waning demand for petrol cars. Average monthly sales of the car declined to around 18,000 units between April and September this financial year from over 25,600 units sold every month in 2011-12.

But Bhat is now confident. “Sales of Alto have been impacted due to the increasing preference for diesel cars. I am sure after the launch of the new model, sales would not only go back to the original levels but we will also gain incremental volumes,” he adds.

Petrol costs 45 per cent more than diesel which has made an increasing number of consumers opt for diesel vehicles despite an initial price premium of Rs 1-1.5 lakh. Latest industry data available show between April and July this fiscal, while sales of diesel vehicles have increased by 54 per cent to account for 57 per cent share in the passenger vehicle market, those of petrol models have declined by a fifth in the period.

According to data available with the Society of Indian Automobile Manufacturers, while sales of cars in the mini segment (with length less than 3600 mm and engine displacement up to one litre) have declined by 16 per cent to 249,344 units in the first six months of the fiscal, Maruti Suzuki’s volumes in the category have fallen by 21 per cent.

The company’s market share in the segment has dropped by five percentage points to 74 per cent in the period. With the help of Eon, rival Hyundai has increased its share to 24 per cent till September this fiscal as compared with 16 per cent in the year-ago period.

The initial response to the upgraded Alto 800 has, however, been lukewarm with around 6,000 pre-launch bookings. The numbers pale compared to the demand the company’s premium hatchback Maruti Suzuki Swift had generated prior to its launch in August last year. The Swift had notched up a whopping 50,000 units in pre-launch orders.

Maruti Suzuki is, however, optimistic. “The response is pretty good given the current market conditions. With the ‘shradh’ period ending on Sunday, the numbers will pick up,” says a senior executive at MSIL. Sources in the company indicated bookings are expected to increase to 10,000 units by October 16.

Analysts believe such new launches could be the only way to keep customer interest alive in the mini segment which is critical for Maruti. This is particularly so as product life cycles have shortened from five-six years to two-three years now. What could give Maruti Suzuki hope is the general belief that the success probability for the new Alto is quite high, the unique selling proposition being a proven platform (Alto) and a contemporary engine that will redefine the fuel-efficiency paradigm.