Maruti Suzuki switching lanes: Small cars now down to 25% of total sales

Maruti Suzuki, which started as an entry-level carmaker 35 years ago (the 800 was launched in 1983) and rode on the popularity of these cars to become the market leader, now gets just one-fourth of sales from this segment. Not very long ago (in 2011-12), this segment brought almost half of the carmaker’s sales. The share of the mini segment, a classification for small cars up to 3.6 metres in length, has declined for four consecutive years, even as total sales continue to expand in double digits.

Changing customer preferences, supported by growing incomes, are the primary factor driving this change. The mini segment, which once used to have the widest product portfolio of the 800, A-Star, Alto, and WagonR, is just left with two products (the Alto and WagonR) now. The Alto remains the most-sold car in the country, but its share in Maruti’s sales has been on a decline. 

The compact segment has emerged as the biggest one in domestic sales and contributed to over 45 per cent of volumes last financial year. This segment used to account for less than one-fourth of sales in 2011-12. Even if we club the compact and super-compact segments (the latter became part of compact), their sales contribution in 2011-12 was just about one-third. 

“The growth of the compact segment has been much higher than the entry segment in the past few years. While we expect the entry segment to keep growing, the compact segment will grow even faster. There is more money in the hands of buyers and they want to upgrade,” said R C Bhargava, chairman at Maruti Suzuki. For Maruti Suzuki, compact segment comprises bestsellers like the Baleno, Swift, and Dzire, besides the Ignis and Celerio. The bestsellers command a waiting period of up to four-eight weeks.

* small sales came from the executive segment, which had the Kizashi; mini, which had 4 products (800, A-Star, Alto & WagonR) in 2012, now only has Alto and WagonR; compact, which had Swift, Estilo, and Ritz in 2012, now has Swift, Ignis, Celerio, and Baleno. Dzire/Dzire Tour, which were in the super-compact list, subsequently became a part of the compact; LCV: Light commercial vehicle; UV: Utility vehicle.  Source: Company reports

It is interesting that the share of the compact segment has been moving up in a scenario of double-digit domestic volume growth year after year. Domestic sales of the country’s top carmaker have surged from a million units in 2011-12 to 1.65 million vehicles in 2017-18. For 2017-18, the volume of compact cars sold was at a record 748,475 units, followed by mini at 427,183 units. The gap between these two segments has been widening year after year.

Another emerging segment for the carmaker has been utility vehicles. The launch of the Brezza and S-Cross has helped to grow the share of this segment from less than 1 per cent in 2011-12 to over 15 per cent in 2017-18. The Brezza helped the company become the biggest sport utility vehicle (SUV) player in the domestic market, overtaking Mahindra & Mahindra. The Brezza happens to be the most-sold SUV in the market. 

Besides bringing products like the Ciaz, Brezza, Baleno, and S-Cross that changed Maruti Suzuki’s small carmaker image, the company also rolled out a new sales network called Nexa in mid-2015 to sell premium cars.

S-Cross, Ciaz, Baleno, and Ignis currently form the Nexa line-up. The increasing contribution of compact cars, bigger sedans, and SUVs has helped the company improve average realisation and profitability. Maruti Suzuki earned a record profit of Rs 77.21 billion in 2017-18.

The trend of rising compact car share at Maruti Suzuki is also representative of the industry. Korean carmaker Hyundai, the second-biggest player, has also seen the contribution of mini cars (it only has Eon in that segment) go down, while sales of compact cars and SUVs have become bigger. 

Data from Society of Indian Automobile Manufacturers (Siam) shows the size of mini segment (in the country declined from 583,661 in 2016-17 units to 571,413 units in 2017-18.  According to Siam classification, a mini car is one that is usually less than 3.6 metres in length and has an engine capacity of up to a litre. Leading models in the segment include Alto, WagonR, Kwid, and Eon. In the same year, the domestic compact segment expanded almost 10 per cent to 1.39 million vehicles. Siam includes vehicles between 3.6 metres and 4 metres in the compact segment and they usually have an engine capacity of up to 1.4 litre.