After a slow start, Nexa finds its footing

Although it is reliant on just one car to drive growth, sales have picked up over the past year

Maruti Suzuki’s year-old effort to establish itself in the premium vehicle category through Nexa, a separate sales network, has had some hits and a few misses. Nexa now brings almost one-tenth of the monthly domestic sale (by volume) for the country’s largest car maker. About a hundred thousand cars have been sold through this channel that retails only two products: the S Cross crossover and Baleno hatchback. If Nexa was an independent company, it could have been the sixth largest player in the Indian car market with monthly volume of around 12,000 units.

But the volumes are skewed towards the Baleno which was launched in October, two months after the S Cross debuted at Nexa. The Baleno, with its lower price tag, brings about 70 per cent of the Nexa volumes. Even after all these months, the Baleno has a waiting period of up to eight months. It is this car that changed the fortunes of Nexa after Maruti overpriced the S Cross.

Within two months of the launch, certain variants of the S Cross were selling with a steep discount of Rs 90,000. That forced Maruti to introduce the Baleno at an aggressive Rs 4.99 lakh. The price prompted many to question why the car was being given a premium push. The company argued that the premium character was not just about pricing, but was also related to design and features.

To be sure, both the vehicles have faced a recall: in May, over 75,000 Balenos and more than 20,000 S Crosses were recalled.

Around the festival season this year, the company will launch two new Nexa products: the Ignis and Baleno RS. The Ignis is a mini SUV that will compete with Mahindra’s KUV100, while the second is a sporty version of the Baleno. By 2020, when Maruti aims to sell 2 million vehicles a year, it expects 15 per cent sales to come from Nexa.

Through Nexa, Maruti sought to change the perception that it was a maker of small cars. It has achieved some success in doing that, though not entirely due to Nexa. Its entry into the premium sedan segment with the Ciaz in 2014 was the first step in trying to change the perception of  buyers. The Ciaz has given tough competition to the Honda City, the market leader. Another non-Nexa vehicle, the Vitara Brezza compact SUV, launched in March, has reinforced Maruti’s ability to play in Rs 5-10 lakh price band.

TEST DRIVING NEW IDEA

• July ‘15: Maruti launches Nexa to cater to its high-end customers
• Aug ‘15: S-Cross launched as the first Nexa vehicle, priced between Rs 8.34 and Rs 13.74 lakh
• Oct ’15: Dealers start to give discounts of Rs 90,000 on top variants of S Cross
• Oct ’15: Maruti brings second vehicle to Nexa, prices it aggressively at Rs 4.99 lakh
• Jan ‘16: Price trimmed by Rs 2 lakh on certain variants of S Cross
• Mar ‘16: Baleno bookings cross 100,000 units
• Mar ‘16: 127 Nexa outlets set up across the country
• Jul ‘16: Nexa completes one year, over 100,000 units of Baleno and S Cross sold

The next step
Nexa will have a greater role in Maruti’s overall plans as it expands its reach and product range. The company had planned to set up 100 Nexa outlets in FY16 but ended up with 127 outlets. By the end of March next year, the number of Nexa outlets is slated to reach 250 from the current 150 in 90 cities.

“The challenge was that the new generation of customer was looking for an excitement which they felt Maruti lacked. During market research, we found that the new generation sought a premium treatment and that is why they did not consider Maruti as a premium brand,” says R S Kalsi, executive director (marketing and sales), Maruti Suzuki.

It was not easy to convince parent Suzuki Motor Company. “There was scepticism outside and within the group. We had brainstorming sessions and did our homework. It took some time to convince Suzuki,” says Kalsi. The Japanese auto major had never experimented with such a network anywhere. Maruti wanted to deliver its modern product line-up with a different experience to buyers.

Only products would not have worked. “We needed to work on delivery experience and the environment in which we are delivering. Some digital experience and a feeling of exclusivity were needed. Technology is a faceless entity unless there is someone to deliver an experience. Therefore, relationship managers were hired,” says Kalsi. These managers, about 3,500, were hired from airlines, hospitality and banks.

The move to set up Nexa created doubts among a section of industry watchers. “There were apprehensions that this may alienate our existing channels. But we had their support. We had decided to restrict Nexa only to existing partners to drive synergy at sales as well as service front,” says Kalsi. Maruti has spent big bucks on branding and advertising for Nexa and the two cars. Very recently, it sponsored the 2016 IIFA Awards in Madrid.

How have the 1,850 regular sales outlets that bring the bulk of volumes changed post Nexa? Kalsi says the hardware and infrastructure at existing showrooms remain the same but the other retailers have started to replicate the soft skills from Nexa.

A Delhi-based dealer for Maruti, who operates two Nexa showrooms, says the cost of operating a Nexa outlet is much higher compared to a regular outlet. “But the (strong) demand for the Baleno means we do not need to carry an inventory. So, there is little investment in stock. There is no loss and the outlook looks promising,” he says.

The company has tied up with Sony to offer an international music lounge through the Nexa app. “We are not stopping here. We want to engage the customer regularly,” says Kalsi. Customers are invited for film shows and grooming workshops are being held in some cities. Maruti indeed has had its grooming with the Nexa.