Small is beautiful, but Maruti likes to make it big

MUMBAI: With its bread-and-butter entry-level segment of cars struggling to slot into the right gear, Maruti Suzuki is eyeing ‘upgraders’ buying sports utility vehicles and multipurpose vehicles that cost up to Rs 20 lakh to drive growth and protect its share in a market the Japanese carmaker has led for decades.

The decision by India’s biggest carmaker to extend its bailiwick and populate a far pricier segment comes after newcomers Kia Motors and MG Motors bucked a sluggish sales trend in the broader industry to corner single-digit market shares within three months of debuting in the country.

In an alliance with Toyota, Maruti Suzuki will be targeting the Hyundai Creta space with a midsize SUV in 2022, and this vehicle will be based on the current Brezza architecture. A C-segment MPV in 2023 is also planned, and both vehicles are likely to be produced at Toyota’s factory in Bidadi, industry sources told ET.

Unlike the re-badged Baleno, Ciaz and Ertiga, which will be shared by Maruti and Toyota in India till 2022, the SUV and MPV under development are likely to have distinct characteristics or differentiation to ensure that both companies gain from India’s growing preference for utility vehicles.

The utility vehicle segment is expected to overtake the humble hatchback segment in India, as an increasing number of buyers prefer the tall and high-seating SUVs and MPVs that cost as low as Rs 5 lakh and as high as Rs 1 crore. According to vehicle forecasting firm IHS Markit, utility vehicle sales will close 2019 at 38%, a tad behind the hatchback segment, before overtaking the latter in 2020. The share of entry-car or mini-car segment, once Maruti’s mainstay, today accounts for just 10% of the overall market as against 25% share it enjoyed 5-7 years ago.

Apart from bringing in the petrol versions of Vitara Brezza and S-Cross, Maruti created an entrylevel SUV with S-presso. Maruti expects a significant number of its Swift, Dzire, Ciaz, and Ertiga buyers to eventually upgrade to a bigger SUV and MPV.

With just Vitara Brezza and S Cross, Maruti had overtaken Mahindra as India’s largest utility vehicle maker. However, with stiff challenge posed by Hyundai Venue on one hand and Mahindra XUV 300 on the other, the company has seen its utility vehicle volumes come under pressure.

“With over a dozen SUVs planned by its rivals, Maruti Suzuki knows it has to have competitive offerings to retain its 50% overall share. The exit from diesel makes compact UVs a challenge, but a 1.5-litre diesel engine is not yet ruled out,” said one of four executives aware of Maruti’s plans. “Plus, Maruti will be relying on the localised hybrid solutions from Toyota to spruce up its future portfolio.”

Maruti Suzuki declined to comment. “As announced during March 2019, apart from joint development of a Toyota C-segment MPV and OEM supply to Suzuki, the production of the Suzuki-developed compact SUV Vitara Brezza will commence at TKM,” a Toyota Kirloskar spokesman said. “We will not be able to comment on any other model or timelines as it pertains to our future product plans.”

So far, Maruti Suzuki has succeeded in tapping into ‘upgraders’. Since starting the premium car retailing division Nexa, it has sold over a million units and consistently outsold Honda City for the last few years to lead the midsize sedan segment as well.