Growing beyond small car manufacture

In launching the SX4 on Monday, Maruti Udyog made only its second attempt in over seven years to hit the sedan market, and thus grow beyond its image as a maker of small cars. And the difference with the first "" the Baleno's launch in late 1999 "" could not have been starker.

The Baleno was Maruti's first new car in six years and the first after the sector was opened up to foreign competition. The lull had been caused by an acrimonious battle for control between the equal partners, the Union government and Suzuki Motor of Japan. Besides, Maruti's fortunes, in terms of both profitability and market share, were dwindling.

At that time, Hyundai had launched the Accent and Ford its Ikon. The two cars had redefined the sedan market by bringing the prices down to over Rs 5 lakh. (All sedans until then "" Opel Astra, the old Honda City, etc were priced at Rs 6.5 lakh or more.)

Maruti wanted to place Baleno at the lower price band of the sedan segment, but could not. The local content in the car was low, at about 40 per cent or so, and that pushed up the production cost. The management was ready to bear the burden in the short term. The price would have become viable once the local content rose.

But the government raised the red flag. First, its nominee on the board put his foot down. That was followed by a senior figure in the government giving a dressing down to the senior Maruti executives. "You want to sell the car at a loss, so that the company's fortunes decline and Suzuki can buy it cheap," he thundered.

The consequence was that Baleno debuted in the market at a burdensome price tag of Rs 6.74 lakh (ex-showroom, New Delhi). Naturally, even the people who liked the car preferred to buy the much cheaper Accent or Ikon. Baleno never gathered momentum. Its prices were cut after Suzuki gained majority equity in the company four years ago. But by that time, the battle was lost.

The SX4 is a study in contrast. Determined to lure the potential buyers of runaway segment leader Honda City, Maruti has priced the higher variant of the SX4 against the base variant of the City, even though its car has more features and can hold its own against much more expensive cars on the safety front.

Maruti managing director Jagdish Khattar is hoping that the new car will have a "disruptive impact" on the market, that its pricing and features will attract buyers from the lower as well as higher segments.

The company, which has been launching a plethora of models and upgrades every year, has gained confidence from the success of the petrol and diesel variants of the Swift. Loved for its design, the Swift has helped the company shed its image as a maker of reliable but staid small cars (think Wagon R, think Alto). It also provided the stepping stone to the sedan.