Competitive Strategies – Maruti Motors – Small Cars

If it is one company that protects its market share for many years in automobile industry, that would be undoubtedly Maruti Motors Ltd. In early eighties, Maruti Suzuki cars were introduced for middle class Indian families. Though government gave enormous support in the beginning, later this multi-national company thrived in the market because of its commendable production, financial, operational and marketing strategies.

Let us look at Maruti’s marketing strategies; particularly competitive strategies. When Maruti introduced its range of cars in the beginning, it rolled out small affordable cars for Indian families. Initially, the cars were priced in the range of Rs. One lakh. Then competitors, Premier Padmini and Hindustan Motors Ltd., whined that government of India gave undue support to Maruti Suzuki small cars thereby their brands FIAT and Ambassadors were literally struggling to catch up with decent market share. But in early 1990’s, government of India opened up Indian market and international car manufacturers such as Ford, Nissan, Toyota, Hyundai, Chrysler, Honda, General Motors and many more entered the market. Notable Indian car manufacturers Tata Motors and Mahindra & Mahindra too consolidated their car business because of government’s liberal policy. However, for the last twenty years from 1990, Maruti is leading the pack with impeccable track record.

Let us take the example of small cars. Maruti, initially introduced Maruti 800 and later came out with Alto. When companies like Hyundai, Honda, Tata Motors and Renault attacked Alto brand with Santro, Kwid, Tiago and Livo, Maruti did not lose its focus. In small car category nobody could dispose Maruti in spite of several attempts. Why?

Competitors always attack the leaders with many surprising strategies. In car industry, introduction of new variants, offering price discounts, bring in new technologies, aggressive after sales services are some key ingredients for success. Hyundai, when promoted its Santro brand aggressively, Maruti brought many more variants such as Wagon R and Alto to encourage its distributors to show more varieties. When Renault’s Kwid created storm with its peppy advertisements and trendy positioning, Maruti brought Celerio brand to counter Renault. Maruti Ltd., as a company has market share close to 54% per cent in India. It has range of cars in small, SUV and luxury segments. Due to its large market share and rich cash flow, the company can offer deep discounts and promotional offers to its buyers. Recently, Tata Motors brought a small new brand car Tiago in small car segment after the failure of Tata Nano. But, to defeat Maruti’s leadership position, one needs extraordinary Strategies. At the moment no competitors seem to have that.

Maruti is a household name in Indian Market for two major reasons – excellent mileage and good after sales service. Indian customers being cost sensitive would always look for better car with good after sales service. Maruti fits the bill.

In India, small cars are mostly purchased by two-wheeler owners. There are more than 200 million two-wheeler owners in India. Only few companies like Maruti, Renault, Hyundai Tata Motors and Honda are competing in small car segments because margins are very thin. Moreover, these cars are mostly sold in Tier II and Tier III cities. Automobile companies can make profit only on economics of scale by selling large volume of cars. Therefore, to sell large volume of cars, manufacturers should come up with prudent marketing strategies.

So far, Maruti appears to be the winner in maintaining its lead in small car segment.

These are some interesting quotes by the car industry veterans that would give a perspective of market situations for small cars in India.

These are some interesting quotes by the car industry veterans that would give a perspective of market situations for small cars in India.

The challenge in the segment is not engineering capabilities it’s about “economics of volumes” added Mukhtyar.

“People are discounting steeply in the market and I cannot afford to do that. We do not have deep pockets to buy market share”. Sumit Sawhney, MD and CEO, Renault India.

“There is a high correlation between new model launches and spike in a segment. Trendy looking new models at an attractive price will always lead to an uptick in sales”. Points out Kavan Mukhtyar, partner and leader, automotive, at PWC.

-by Dr. Chidambaram Babu, Director