Small-Car Maker Maruti Suzuki Threatens Mahindra & Mahindra’s Utility Vehicle Crown
Maruti Suzuki India Ltd., best known for its small cars, now sells more than a fourth of all utility vehicles in India. That has brought it within touching distance of Mahindra & Mahindra Ltd. (M&M), India’s largest seller of sports and multi-utility vehicles.
While small cars like the Alto still contribute nearly a third to Maruti Suzuki’s sales, their share fell amid weak rural demand even as the volume of utility vehicles (UVs) more than doubled in the year ended March 2017. The surge was driven by the success of its Vitara Brezza compact SUV, pushing up India’s biggest carmaker’s share in the segment by nearly nine percentage points over the previous year, according to data from the Society of Indian Automobile Manufacturers (SIAM). In comparison, M&M’s market share declined by nearly a similar margin to 29.6 percent.
Maruti Suzuki is trying everything differently, said Abdul Majeed, partner-assurance at PwC who tracks the automobile sector. They have had many new models over 12-16 months, such as the Brezza, and there haven’t been many launches from rivals, he added.
The company has gained from rising demand for utility vehicles over the last few years as Indians bought vehicles that offer a higher ground clearance. Carmakers shrunk the size of such vehicles to create a new category of compact SUVs like the Brezza to avoid higher taxes and cut costs. The result: one in every four cars sold in India is now a UV compared to one in 10 a decade ago, according to data from SIAM.
Most carmakers have compact SUVs in their portfolios. The new models that succeeded catered to the aspirations of customers as automakers understood the needs of buyers, said Kumar Kandaswamy, senior director who tracks the automobile sector at consulting firm Deloitte Touche Tohmatsu India.
Mahindra’s other rivals also saw utility vehicle sales jump. Hyundai Motor India Ltd., which sells the Creta SUV, saw a 52 percent increase while Toyota Kirloskar Motor Pvt., the maker of Innova SUV, witnessed a 34.5 percent rise in sales in the segment. The two firms together contributed a quarter of all UV sales.
In the overall passenger vehicles market, Maruti Suzuki managed to extend its lead over rivals to 47.38 percent, half a percentage point higher than the previous year. Hyundai Motor maintained its second position, but its market share fell to 16.72 percent from 17.36 percent a year ago. M&M too lost market share to 7.75 percent, down from 8.47 percent in 2015-16.
The combined passenger vehicle sales for all companies rose 9.2 percent in FY17 over the previous year.
Tata Topples Honda
Maruti Suzuki’s performance in the new segment is comparable to that of Tata Motors Ltd. The Tata Group company, which was earlier known for its utility vehicles like the Sumo, replaced Honda Cars India Ltd. as the fourth largest carmaker on the back of the Tiago compact. Tata Motors’ overall market share rose from 5.35 percent to 5.66 percent as its volumes rose by nearly a half, according to SIAM data. Honda Cars’ share shrunk to 5.16 percent from 6.88 percent.
Renault India Pvt., again known for the Duster compact SUV, saw its market share jump on the success of its entry-level hatchback Kwid. Its share rose from 2.57 percent to 4.43 percent as the Kwid sales more than doubled to rival Maruti Suzuki’s Alto.
The top five two-wheeler manufacturers retained their rankings, though market leader Hero MotoCorp Ltd. lost share. Honda Motorcycle and Scooter India Pvt. Ltd., TVS Motor Company Ltd., India Yamaha Motor Ltd., and Eicher Motors Ltd.’s Royal Enfield gained at its expense. Bajaj Auto Ltd. was the other two-wheeler maker among the top five that saw its market share fall, marginally.
The most crucial shift, Majeed of PwC said, has been the rising sales of scooters. The share of scooters in the total domestic two-wheeler despatches rose to 31.9 percent in 2016-17 from 30.6 percent a year ago. That compared with a nearly similar fall in the share of motorcycles to 63 percent from 65 percent. Scooter sales are rising as both men and women can ride them, Majeed added.
Hero MotoCorp’s share fell to 36.86 percent from 39.02 percent a year ago. Honda Motorcycle's share rose less than a percentage point to 26.86 percent. While Hero MotoCorp gets 90 percent of its total local sales from bikes, for Honda Motorcycle, scooters contribute 70 percent of its volumes.
Hero MotoCorp is catching up, but it will take time, Majeed said. Demonetisation hit the rural parts, where the company has a high exposure, he added. Honda Motorcycle, which has a stronger customer base in the urban pockets, didn’t take that big a hit on account of the currency curbs.
“Newcomers have a plateauing of volumes because it takes them time to penetrate into the rural parts of India. Also, do they have relevant products for those markets,” said Deloitte’s Kandaswamy.
Gurgaon-based Hero MotoCorp dragged the entire two-wheeler market’s performance to a volume growth of only 6.89 percent in 2016-17.
Royal Enfield, the maker of motorcycles of more than 350cc engine capacity, saw its market share rise to 3.70 percent from 3.03 percent. Most Royal Enfield’s motorcycles have an average waiting period of two-three months.