Maruti Suzuki Plots Strategy to Stay No.1 in India

MUMBAI – Exiting the U.S., where it was a minor player, was not a significant setback for Suzuki. Chairman Osamu Suzuki is focusing instead on a much more critical issue: the erosion of the auto maker’s Maruti Suzuki subsidiary as India’s market leader.

The auto maker’s car deliveries were down 6.9% year-to-date at the end of March, although Maruti still accounted for more than half of the segment’s sales, according to WardsAuto data. Market share was 32.5%, down from 39% in 2010.

Maruti declared an unscheduled holiday for the first Saturday in March at the Gurgaon plant where most of its models are built. The production slowdown has raised the auto maker’s inventories to a 45-day supply, not including dealer stock.

Osamu Suzuki has made two unannounced visits to India in less than two months to discuss a small-car strategy with local executives. He said during his second visit Suzuki would launch 10 new or refreshed hatchback, compact SUV and light-truck models from India for both the domestic and global markets.

Maruti accounts for 30% of Suzuki’s global sales and 40% of its profits. Its emphasis on small cars is an increasingly vital element of the auto maker’s worldwide success.

Maruti’s strategy includes cost-competitiveness against Nissan and other newcomers to the Indian market. The auto maker benefits from its longtime presence in India and cost-cutting techniques refined over the years.

The small-car strategy is reinforced by the failure of the Kizashi sedan and Escudo SUV to make inroads into the U.S. and other advanced markets. “Taking into account the fact that we have no future outlook for making large vehicles, I think any re-entry to U.S. would be extremely hopeless,” Suzuki says.

The first of the new models for India may be the Regina city car. A 2-door concept was displayed at the 2011 Tokyo auto show, but speculation within the industry is that the production version may be a 4-door hatchback.

The Regina is expected to deliver fuel efficiency ranging from 59 to 70.6 mpg (4.0L/100 km and 3.3L/100 km). Variants may be priced between Rs450,000-Rs650,000 ($8,350-$12,050).

Another priority for Maruti is overtaking Hyundai in export markets. The Korean auto maker’s year-to-date exports of 237,232 units are more than double Maruti’s.

Nissan is launching a low-cost Datsun-branded hatchback by the end of this year. In order to cut costs, it may share a platform with the Micra minicar but would be smaller and less expensive, possibly priced at roughly Rs400,000 ($7,400).

The growing small-car market segment belies the Indian market’s overall sluggishness, with total car sales down 21.0% in March, according to WardsAuto data.

In addition to Maruti’s renewed commitment, Ford and Nissan are increasing capacity and General Motors India, Toyota and Volkswagen Group are devising or refining strategies of their own.