India is graduating from small cars to upper-segment cars: Maruti Suzuki chairman RC Bhargava

RC Bhargava, chairman of Maruti Suzuki, says Indians are moving towards higher-priced SUVs and MUVs and his company is in the ‘phase of transition’ to cater to this ‘shift in the composition of the market’.

Bhargava forecasts that the market for its ‘bread-and-butter’ hatchback segment is likely to decline in FY2024 in a market that is “set to grow by eight percent.”

Speaking to the media after the Maruti Suzuki Q2 FY2023 earnings call today, Bhargava said, “It is the result of the fact that there has been a shift in the composition of the market. We are moving away from a market which was predominantly small cars and hatchbacks, to a market which is more in the upper segment cars — the SUVs and MPVs.”

The chairman of India’s largest carmaker attributed the decline of the small-car segment to the consistent degradation of buyer’s affordability.

“People with limited income are the hardest hit, and the sustained inflation will further make it difficult. They will take a longer time to build up resources to buy a car, but we do have the models in the entry-level segment for them,” said Bhargava.

“The overall hatchback segment has been on a declining trend for the last three years; hatchback volumes have fallen by 27-28 percent and inflation has only made it worse. I expect the small-car segment to further decline next year,” said Bhargava. “We are, however, in a phase of transition,” he added.

New Grand Vitara competes against midsize SUV segment leader Hyundai Creta and the Kia Seltos. Maruti aims to disrupt the fast-groowing segment with options of AWD and a strong-hybrid powertrain.

New Brezza and Grand Vitara a big draw
The company launched the second-generation Brezza compact SUV on June 30 this year and followed it up three months later with a foray into the fast-growing midsize SUV segment with the Grand Vitara, which rivals the segment leader Hyundai Creta, in September. Maruti Suzuki claims it has already secured over 200,000 bookings for these two SUVs.

The company is now looking to showcase a new C-MPV, based on the upcoming Toyota Innova Hycross, at the Auto Expo 2023 in January next year.

Commmenting on the transition to higher-priced vehicles, Bhargava said, “We will showcase the vehicles planned for launch in 2023-24 at the Auto Expo. These developments must happen as we, as a car manufacturer, must follow our customers. If the customer profiles and their needs are changing, we too must change with them,” Bhargava said.

Focus on entry-level models to remain
The chairman of India's passenger vehicle market leader, however, clarified that this does not mean that the company is defocusing on the segment, as over 1.1 million hatchbacks are still sold in the country with 8-10 different vehicle options. Maruti Suzuki will continue to work on facelifts, minor changes and variants in the future.

In the first six months of this financial year, Maruti Suzuki sold over half-a-million compact cars, posting growth of 38 percent. This growth is on account of a low year-ago base and new model introduction.

Bullish on FY2023 numbers
Nevertheless, with India’s passenger vehicle market consistently achieving record sales over the last three quarters, Bhargava showed optimism in overall demand and macro-economic parameters, despite fears of growing inflation around the world.

“Fortunately, in India, the inflation is not as bad as in other parts of the world. The Indian economy is doing well and the GDP growth is better than many global economies. We have reached a stage where the Indian market will touch the previous peak of FY2018-19 and we expect the industry to grow by eight percent this year,” added Bhargava.

On its part, Maruti Suzuki has not given up on its target of achieving two million units’ sales this year. “We are operating at 90 percent capacity utilisation – the only worry being the semiconductor supplies. We will try to match the industry growth,” Bhargava said.

Maruti Suzuki’s new plant in Haryana is expected to be commissioned by 2024. Maruti Suzuki said it is prepared to ramp up output at its existing facilities in Gurgaon and Manesar. The maker of the Swift and Dzire can also access its alliance partner Toyota's manufacturing facility in Bidadi, on the outskirts of Bengaluru.

Maruti Suzuki India, which claims to be the lowest carbon emission in the industry said it is well prepared to transition to BS VI phase II emission norms and almost half of its portfolio has already transitioned to upcoming RDE norms to be implemented by April 2023.

As regards the company's entry into the EV market, Bhargava said, “I don't think we started late, we are starting in a very systematic manner. We are localising much more, battery production, component production, we are keeping a watch on the infrastructure development too. We want to make sure the customer to whom we sell the car is looked after well and has no issue with service.”

Led by 35 percent volume growth in the July to September 2022 quarter, Maruti Suzuki posted four times growth in net profit to Rs 2,062 crore with revenues rising by 46 percent to Rs 29,931 crore.

While it continues to ride the wave of strong demand, as is evident from the 40 percent uptick in its 1,94,000-unit sales during the festive Diwali period alone, the company is also facing headwinds from the slowdown in the small-car segment that has impacted its market share.