That’s my share, you can’t have it

This is almost like getting a car custom-made. So if today there is a buyer who can afford a Zen LX, but not the Zen VX, there may be another Maruti cartomorrow in between the two which would tempt the buyer to look deeper into her pocket. Clearly, no other player in the Indian market today can dream of offering so many models and variants. Not for quite sometime.

Maruti is beginning this tale with the launch of Zen Classic on August 23. This is reported to be followed by a fuel-injection system-fitted Zen next month which will meet the Euro-II norms. All models of Maruti will be Euro-II compliant by January 2000. And even though the company is light-lipped on the new models, everyone has heard about the launch of Baleno a mid-luxury car in November, of Wagon-R in January and the launch of Alto in April and is looking forward to them.

Maruti has also identified two other areas where it needs to catch up its service network and the resale market. Even though the company has over 1,300 authorised service outlets throughout the country, majority of Maruti owners (52 per cent, as per MUL’s figures) still go to the roadside mechanics for repairs. But onceMUL junks the carburetor-technology for good, buyers of Maruti cars fitted with fuel-injection system will have no option but to turn to the authorised service stations. And the more customer-friendly and affordable these are, the better it would be for MUL. Besides service stations, MUL also needs to put a brake on the downslide in the second-hand prices of its cars.

A week back, Maruti Service Masters — a joint venture between Sumitomo Corporations of Japan, MUL and Maruti Countrywide — was announced. The JV which has a 47.5 per cent equity participation each of MUL and Sumitomo and 5 per cent stake of Maruti Countrywide is aimed at augmenting the after-sales service in the organised sector. It has opened a service station in Okhla, New Delhi. The JV will also explore the possibility of entering the second-hand car market in a big way.

According to Pankaj Narula, Director and Chief Executive Officer, Maruti Service Masters, there will always be a market for second-hand Maruti cars. “Even MUL plansto come out with a list of approximate resale prices of its cars sometime soon,” Narula said. Maruti Service Masters would evaluate cars and do them up. The company will also give a warranty on the second-hand cars they sell, apart from finance. According to Narula, the company plans to get into the second-hand car business before the close of this calendar year.

According to Khattar, Maruti’s strategy is to be present in all segments. So if in future, the upper or the mid-luxury segment begins to look up, MUL should have a model that stands to gain. Esteem, which is MUL’s mid-size car, today has a 36 per cent market share in its segment.

But with the launch of Ford India’s Ikon and General Motor’s Opel Corsa, a clear segment will emerge demarcating Esteem, Fiat Siena and Ikon-like cars from the bigger and more spacious ones (that are priced above Rs 7 lakh) like Opel Astra, Mitsubishi Lancer and Honda City.

In any case, Esteem is priced Rs 2 lakh below these cars and has a lower engine capacity of1300cc, as compared to them. Therefore, in this upper segment, a model like Maruti Baleno (which is said to have a 1600 cc engine), is capable of even wiping out cars from players like Ford India, General Motors, Daewoo and Hindustan Motors. According to reports, MUL plans to launch Baleno in two variants — a luxury sedan and a wagon. The wagon is reported to cost around Rs 7.25 lakh.

The company had recently signed a memorandum of understanding with the Directorate General of Foreign Trade (DGFT) under the revised Indian Automobile Policy to import completely knocked down and semi-knocked down kits of Baleno and Wagon-R. Maruti has also chalked out plans to progressively invest Rs 524 crore for manufacturing these two models. The major investment in this case will be on Wagon-R.

Wagon-R for India is said to be a 1000 cc car (that would be launched in three variants) while Alto is likely to be launched in 800cc and 1000cc engine capacities. In terms of looks, Wagon-R looks quite like Hyundai Santro,which is the second largest player in the small car market with a 24 per cent market share. Zen, at present, has a 36 per cent market share.

Wagon-R could, therefore, take away considerable share of Hyundai Santro and Daewoo Matiz. Because all those who prefer Santro or Matiz for their tall body would have an option from good-old Maruti.

The strategy for Alto is still not clear. Alto is the other name for the export version of Zen. It appears that the 800cc Alto will be positioned between Maruti 800 Deluxe and Zen LX. There is a price difference of over Rs 40,000 between these two models at present.

With the launch of its new models, MUL is targeting at a turnover of Rs 10,000 crore-plus by the 2000-01. However, for this financial year, Khattar has a realistic turnover expectation of something in the vicinity of Rs 9,000 crore (it was Rs 8,118 crore in 1998-99). Fresh investments and the price cuts undertaken in December 1998 will affect profitability. According to Khattar, the company has decided tooperate on lower margins for the next four-to-five years.

Maruti is confident of touching a total sales figure of 4,00,000 by the end of the current fiscal as against around 3,30,000 units sold in 1998-99. But once MUL’s third plant in Gurgaon becomes fully operational, the company can produce over 4,50,000 cars a year. Maruti realises that with the entry of new players, it stands to lose more market share. That’s a universal phenomena. However, Khattar is confident that as the automobile industry matures, the final share that Maruti will get will definitely be above 50 per cent.

With the launch of the new models, the MUL chief expects the profitability of the company to improve. “The 36 per cent rate of growth achieved by passenger cars in the first quarter is not sustainable,” Khattar said, adding that such a situation arises each time new models are launched. Going by that theorem, even MUL will stand to gain from the launch of its new cars. But how many new cars can the market and our roads take isanybody’s guess.