 "R S Kalsi")
Maruti Suzuki, the country's largest car maker, will enter the light commercial vehicle (LCV) market early next year. This will put the company in the league of Tata Motors and Mahindra & Mahindra which make cars as well as commercial vehicles, though not always with great success.
The LCV market sure is huge. These small trucks are used for intra-city transport of goods. As cities expand, their demand is set to strengthen further. A total of 382,206 LCVs were sold in the year ended March 31, down over 11 per cent from 432,233 in the previous year, thanks to the economic slowdown. The largest player, Tata Motors, sold 163,419 units, followed by Mahindra & Mahindra which reported sales of 149,520 units.
The decline continues this year as well (down over 7 per cent in the first six months), as a result of which LCV makers are saddled with idle production capacity. Other players in the market include Ashok Leyland and Piaggio Vehicles.
Both Tata Motors and Mahindra & Mahindra have well established products that enjoy huge popularity. Take the case of the Tata Ace, popularly known as chhota hathi (baby elephant). Launched in 2005, Tata Motors has sold about 1.5 million units of the Ace so far.
Maruti Suzuki, which lords it over nearly half of the domestic passenger vehicle market, will face tough competition from these entrenched players. "Selling commercial vehicles is a totally different ball game compared to cars. Maruti Suzuki must be ready to put its best foot forward," says an analyst tracking the automobile industry. Also, the entry barriers are low. Mahindra & Mahindra, for instance, developed its small truck, the Gio, for as little as Rs 25 crore.
Much of Maruti Suzuki's LCV plan is under wraps, including the price. What is known is that the product is being developed along with its Japanese parent, Suzuki Motor Corporation, and is being designed to have a global appeal. To begin with, the company will have only one LCV and will look at expanding the range after seeing the initial response.
It will have a high degree of localisation, allowing Maruti Suzuki to price it competitively. However, none of the LCV components is common to the rest of its product range.
"In terms of performance, the product is going to be different from what is available in the market", says C V Raman, executive director (engineering), Maruti Suzuki.
Banking on brand
It is evident that the company wants to leverage its brand equity as a maker of highly fuel efficient vehicles to make a mark in the LCV market. What will also play on the prospective buyers mind is that Maruti Suzuki spare parts are known to be inexpensive and it has a nationwide service network. The total cost of ownership is vital in the LCV business.
The owner of an LCV, unlike that of a car, needs quick service - he cannot let his asset stay idle for long. Thus, he would be reluctant to drive his LCV over a long distance to get it serviced. If Maruti Suzuki wants to replicate its success in cars, it will have to put together a large dealership network as quickly as possible.
Maruti Suzuki has indeed drawn up plans to set up a dedicated sales network to market the LCVs. After the over 1,700 Maruti Suzuki outlets, 80 Nexa outlets and 900 True Value outlets (dedicated to pre-used cars), this will be the fourth retail network from the company.
To begin with, the company is launching a pilot for the new LCV network. The pilot is being rolled out in four states during the current quarter, one each in northern, central, eastern and western India.
The network will have a smaller format compared to the car dealerships. Unlike the car dealerships which are spread over an area of up to 2,500 square feet, the LCV dealerships will have an area of 1,000 to 1,500 square feet.
The showrooms will be a no-frills affair and will not be air conditioned. Most of these will have a dedicated service station for LCVs. "These will be simple functional set ups to match the profile of a LCV buyer. After the pilot, we will expand the network to cover most Indian states," says R S Kalsi, executive director (marketing & sales), Maruti Suzuki.
The LCV network will stand in sharp contrast to what Nexa stands for: premium treatment, sophistication, luxury and style. The LCV dealerships will be manned by sales executives who can deal effectively with the LCV buyer, make him feel at ease, talk to him in his dialect and convert prospects into sales. Unlike Nexa, for which the workforce was hired from airlines and luxury hotels and trained at five-star hotels, the team for LCV dealerships could be hired from tractor and other LCV dealerships.
LCVs are largely bought on installments. Therefore, Maruti Suzuki will also have to look at tying up with the non-banking financial companies and regional cooperative banks to provide financing options.
Maruti Suzuki has all along its 35-year history manufactured and sold only passenger vehicles in the country. Within the passenger vehicle segment, it has managed to successfully establish a diverse portfolio ranging from small cars to sedans. But LCV will be a new product for the company.
But the company is confident that it will be able to mark its presence in the segment.
