 "Maruti Suzuki")
Maruti Suzuki may be the undisputed leader in the Indian car market but when it comes to premium vehicles, it is only a fringe player. The company, however, has now readied a brand new strategy to make inroads into this high-end category dominated by the likes of Honda, Hyundai and Toyota.
In about a month, Maruti Suzuki will launch showrooms where its most successful cars, the Alto, Swift and WagonR, will not be on display. These new showrooms called Nexa, will initially sell only one car, the Ciaz, a sedan launched by the company last October, and their focus will be the metro cities.
Going forward, all premium Maruti Suzuki vehicles in the Rs 9-10 lakh range or above are likely to be exclusively sold only through these showrooms, at least in cities where the Nexa network will be rolled out. These showrooms will also sell the soon-to-be-launched crossover, globally known as S Cross.
Maruti Suzuki's earlier experience with mid-size sedans like the Baleno, SX4 and Kizashi was lukewarm. As a result, production of these cars was discontinued. The Ciaz, however, has seen a decent response and now sells about 4,600 units a month (April 2015 data) in the domestic market compared to 8,200 units of the Honda City and 2,800 units of the Hyundai Verna against which it competes.
Will the new distribution channel give a boost to its premium cars? For one, the showrooms will have a few distinctive features such as a more sophisticated and trained workforce, more time to each customer and a lounge for a more personalised experience. Maruti Suzuki may be drawing from the trend prevailing in aviation and banking where more valued customers are often treated with more care than others.
Ajay Seth
Ajay Seth, executive director and chief financial officer, Maruti Suzuki, says: "We are creating the new channel to cater to customers who want to buy a premium car. We need to make sure we give them the focus and detailing. Not that we will be dealing differently with the other customers, but a customer buying X product will have different expectations from one buying Y. We must meet those expectations". He declined to elaborate on the scale and scope of the network.
Gearing up
The first such showroom, which is ready but has not been officially launched, is situated in Delhi's Dwarka area and belongs to Magic Auto. The showroom has a carpet area of about 1,200 square feet but only three cars, all Ciaz, are on display there. In an effort to distinguish Nexa from its regular showrooms, the signboard displaying the Maruti Suzuki name at the entrance has a jet black background rather than silver, its trademark colour so far. Apart from vehicles, the showroom also stocks genuine accessories and there is a lobby area with sofas and digital display boards. Magic Auto executives decline to comment on the new showroom pending a formal launch.
Amit Kaushik, associate director, IHS Automotive, says Maruti Suzuki is still perceived as a middle class car brand. "The new initiative is a brand building exercise. The aspirations of buyers are changing. People are turning brand conscious. The mindset of the buyer who has a budget of Rs 3 lakh is different from the one who is willing to spend thrice the amount. Factors like mileage and cost of ownership are prime concern of the former, who also has a low focus on design and safety features. The latter is conscious about style, status, design and safety. Both can be better targeted separately".
There are enough successful examples of a similar, if not entirely identical, exercise by automobile companies to distinguish segments with a different brand identity. Toyota has a completely different brand Lexus for luxury high-end vehicles. Nissan also has a brand named Infiniti, while Volkswagen has several brands- Audi, Bentley, SKODA, Porsche- under its fold , most of them well-established in the market.
Experts tracking the company say the inability of Maruti Suzuki to make a mark in the premium car segment did not go well with investors. Jinesh Gandhi, senior vice-president (research) at Motilal Oswal, says it will increasingly be a challenge for the company to manage the entire product portfolio from an Alto to Ciaz under one roof. The premium network will enable Maruti Suzuki to better control customer experience. "The only discontent against Maruti Suzuki (from investors and shareholders) is that it has been unable to scale up the presence in the premium segment. Challenges will come in managing dealerships since the initial volumes will be low. Also, there has to be a clear alignment between the vision of Maruti Suzuki and the dealer in this exercise", adds Gandhi.
Like every new initiative, this too will have a cost and the initial volumes may not yield high return. But Gandhi says these decisions are taken keeping in view the long-term potential. "It may not be viable in the first year or so since Maruti Suzuki has limited products in the premium category. Since this is an experiment, they will have to keep fine-tuning the strategy depending on the results. This is clearly a preparing ground for new launches in the premium segment".
