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Maruti's lead narrows in race for market-shares

Neena Haridas in New Delhi

After two years of hibernation, the automobile industry drove into the fast lane in 1999, but in the process market leader Maruti Udyog Limited, the joint venture of the Indian government and Japan's Suzuki Corporation, got pushed into the gully.

Although MUL still maintains the top position in terms of total sales, the homegrown auto giant has taken a beating in terms of market-share, suffering an all-time low of 51 per cent -- a measly number compared to its over 80 per cent share for the last several years. Consider this: In January 2000, MUL could only claim a market-share of 51 per cent compared to the whopping 78.6 per cent for the same month in 1999 -- a drop of more than 27 percentage points.

And the challenge comes from none other than Korean chaebol Hyundai Motors whose 'tall boy' small car Santro has made rapid inroads into the Indian market.

Unfortunately for MUL, the drop comes not in just one segment, but two -- the small car and mid-size segments. Maruti's loss is Hyundai's gain as the Korean company sold 7,402 units of the Santro while the Zen lagged behind with 6,337 units in January 2000.

As for the mid-car segment, the Maruti Esteem's 1,144 units fell shy of the Hyundai Accent's 1,243 units for January.

Does this mean the heady days of the Maruti monopoly are finally over? Jagdish Khattar, MUL's managing director, says, "When new players enter the market, there will be competition. The market will expand. In such a situation, the market-shares may fall, but that does not necessarily mean that the unit sales will fall too. In the first ten months of the current fiscal (April 1999 to January 2000), we have achieved a growth of 25 per cent by selling 308,875 units as against 246,401 units sold during the corresponding period last fiscal. During this period, sales of the Maruti 800 have grown by 22 per cent, that of the Omni by 48 per cent and that of the Zen by 22 per cent over the corresponding period last fiscal."

Maruti's market-share in the passenger car segment has slumped to 62.7 per cent, a drop of a massive 18 percentage points compared to the same period last year when it enjoyed a share of more than 80 per cent. Maruti's problem is that its largest selling segment, the Maruti 800, is itself shrinking in some measure. Sales of the Maruti 800 for January 2000 stood at 12,610 units, down almost 20 per cent compared to 15,716 units in January 1999.

An automobile industry expert says, "The reason for the fall in market-share even though there is growth in number of units sold could be: one, the market has expanded with more number of players and many finance options becoming available; two, the 1998-99 fiscal was very bad for the auto industry with sales growth going down to even minus percentage. 1999 was a good year, so they have gained in numbers, but since the market has expanded, the market-share has fallen."

Sales of passenger cars in calendar year 1999 touched 553,000 units as against 375,000 units in 1998, not counting the multi-utility vehicles.

As for the reason for the Santro's pick up in January, Maruti claims that its despatches for the month had begun only in the second week as there was a maintenance shutdown. "Hence, the figures for January are not really complete nor comparable," said a company spokesperson.

Motoring journalist Murad Ali Baig says, "It is the Zen segment that is going to make all the difference now. Although the Maruti 800 is the mass car, the Zen segment is growing very fast because there are more players now -- the Maruti Zen, Hyundai Santro, Daewoo Matiz, and Tata Indica."

In fact, in 1999, sales in this segment touched 232,000 units, compared to 101,000 units in 1998. In the last ten months, the Zen has sold 77,786 units while the Santro has sold 58,629 units, and the Tata Indica 38,734 units.

Baig says, "How the Maruti Zen fares in front of the Santro, will make a lot of difference to Maruti's overall performance."

On Maruti's falling market-share, Baig says, "It is not as if the market has not expanded in the last year or Maruti's sales itself have not grown. The fact is that the market is growing much faster than Maruti is and the growing number of competitors are slowly but gradually eating into the market-leader's market-share. Now, according to figures released by the company itself, from the level of 25,437 unit sales in January 1999, Maruti's sales have grown to 26,684 cars in January 2000 -- a growth of 5 per cent.

But now, the market itself is actually growing at around 12 to 15 per cent. Overall, I think the small car market will grow at 8-10 per cent with the upper mid-size segment growing at 8-9 per cent. But it is the mid-size segment that will really grow at a scorching pace of 50 per cent and this is where the Ford Ikon, Maruti Esteem, Hyundai Accent and the GM Corsa will have the tough fight."

And the Maruti Esteem has already started feeling the heat in the mid-size segment as the Hyundai Accent is gaining ground. Maruti's Khattar says, "Some of the handles of our cars have come off! Everybody wants to try out the cars! And we don't mind that, we are rather happy that people are showing so much of interest in our cars. Consumers have matured, new models are something they have taken into their stride. And we have responded to the consumers' need for choice by launching new models ourselves. Our strategy to beat competition will be by giving consumers better quality, better and more models. We felt the need to introduce people to newer products from Suzuki, that are appropriate for the Indian market. This is why, we have also showcased the concept car YMO and the Suzuki C2, a compact two-seater sports car, which is a reference vehicle."

It may be recalled that MUL had hiked the prices of its products -- the Omni, Maruti 800, Zen, Esteem, Baleno and the Gypsy King -- in the third week of January, by introducing upgraded versions yet again. The price hike varying from Rs 20,000 to Rs 40,000 was a reaction to the sales tax increase announced by different states.

Meanwhile, it is learnt that Suzuki Motor Corporation president and CEO Osamu Suzuki is planning to re-visit India in March 2000, within three months of his previous visit that generated a controversy, following SMC's refusal to transfer the gearbox technology to Maruti.

Suzuki is likely to hold meetings with Maruti dealers and also call on senior government officials during his next visit, sources said. But a definite schedule of his visit and duration of stay is yet to be finalised.

Senior MUL officials say: ''Suzuki has evinced interest in re-visiting India and his schedule is currently being worked out. However, we are yet to receive a firm date of his visit.''

During his last visit to India, Suzuki had refused to transfer the critical gearbox technology to India saying "it is not required''. He had further stated that since MUL produces only cars and not gearboxes, it does not make sense in transferring the technology to India. However, Minister for Heavy Industries and Public Enterprises Manohar Joshi had said that talks are still on for transferring the technology to MUL. ''Our officials are still talking with SMC officals. We have to put up our demands...Now it is for them to decide,'' Joshi had said.

Transfer of gearbox technology has been hanging fire between the two partners in MUL -- Government of India and SMC -- for a long time now.

Suzuki had earlier submitted before the MUL board of directors a project proposal for transferring the technology and stated that the project would envisage an investment of Rs 12 billion.

SMC had stated in its project report that it is willing to transfer the entire technology for making gearboxes in two phases spread over a period of three years.

The MUL board has been deliberating on the issue for a long time, studying the financial viability of the Suzuki proposal. The company was also deliberating whether it would be desirable to have a new corporate entity for implementing the gearbox project.

As per the initial report, SMC will transfer the technology for making the easy gears in the first phase and the more difficult ones in the second phase. The entire plant will be set up over a period of three years.

During his previous visit to India, Suzuki had unveiled the Wagon-R in New Delhi and inaugurated Maruti's third plant with a capacity of 100,000 vehicles per annum. Besides, he had also addressed a meeting with an apex trade and industry chamber in the capital.

Additional reportage: UNI

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