Small car giant & the wannabes

Maruti faces no threat to its crown despite the emergence of many challengers.

The premium hatchback segment in India has seen the entry of global auto majors Volkswagen, Toyota and Ford over the past one year. And then there is the upcoming Honda Brio in the same segment.

So is Maruti Suzuki’s status as the undisputed small car champion in India under threat? Industry experts say while Toyota Liva, launched late last month, or Honda’s entry-level car, expected by the end of this year, will add to the excitement and make the small car giant sit up, it would be a long time before any of them can seriously challenge Maruti.

Here’s why. Currently, Maruti Suzuki ,with a half a dozen models – ranging from the best-selling car Alto to WagonR, Swift and Estilo – accounts for around 57 per cent of the small car market in India. In the premium hatchback segment, the company’s market share stands at a robust 48 per cent.
 

SMALL IS BIG
MODEL	PRICE (Rs lakh) (ex-showroom, Delhi)
Ford Figo	3.59-5.49
Toyota Liva	3.99-5.99
Maruti Suzuki Ritz	4.02-5.39
Maruti Suzuki Swift	4.02-5.39
Hyundai i20	4.59-7.86
Volkswagen Polo	4.61-7.11

It’s true that newer products like Volkswagen Polo, which was launched in February last year, and Figo from the Ford stable, which hit Indian roads a month later in March 2010, have been well received. The Liva too has generated considerable enthusiasm.

While VW has sold 39,405 units of the Polo since its launch, Ford delivered the 100,000th Figo this month. Toyota has set a target to sell 20,000 units of the Liva in 2011, which roughly amounts to average sales of 3000-3500 units per month.

But observers say the sheer volumes that Maruti sells would make it difficult for any new player to make a significant dent in its market share in the near future.

V G Ramakrishnan, senior director, Frost & Sullivan, says Liva is undoubtedly a serious competition for Maruti in the category, but the sales target for the car this year is not comparable with what Maruti sells of the Swift every year.

“Maruti has two products in the category, the Swift and the Ritz. Toyota offers customers one model at present. Small car launches in the mid segment is important as original equipment manufacturers cannot hope to gain market share without introducing multiple products in the category”, adds Abdul Majeed, leader, automotive practice, Price WaterHouseCoopers (PWC).

However, Sandeep Singh, deputy managing director, Toyota Kirloskar Motor (TKM) is optimistic . Etios, he says has already brought about a quality revolution in the Indian market. Indian customers are aware of what Toyota stands for and Liva has that DNA. “On an average, our cost of ownership is at least 15 per cent less than competition We are ramping up capacity and would be selling 100,000 units of Etios and Liva in 2012”, he adds. This would take Toyota’s India sales to 210,000 units from the 140,000 units it expects to sell this year.

But Toyota’s total sales target for this year is just about equalto what Maruti Swift alone sold last year – and that’s where Maruti has a distinct advantage.

Shashank Srivastava, chief general manger, MSIL concedes, “Liva adds on to the competition among petrol cars in the segment. But Swift and Ritz are well established brands.” The base version of the Liva is priced aggressively at a psychologically significant point of Rs 3.99 lakh (ex-showroom, Delhi) — a few thousand rupees below Maruti’s Ritz petrol model and its most successful car in premium hatchbacks, the Swift.

The premium hatchback category is one of the fastest growing segments clocking a growth of 20 per cent (Jan-June 2011) in an otherwise sluggish industry. As many as 439,000 units were sold in the segment last year. According to industry estimates, Swift had 24 per cent share of the premium hatchback market between January and May 2011, while Hyundai i20 and Ford Figo accounted for 15 per cent each. Ritz contributed to 12 per cent of sales in the category.

There are now 14 models vying for a customers’ attention in the premium hatchback segment as compared to eight models which battled out it in the category in 2009.