Why Maruti Suzuki remains bullish on small car segment

Small cars sales in the local market will revive in the next couple of years on back of economic growth and improvement in income levels of customers at the entry-level, the country’s largest carmaker Maruti Suzuki said, adding it expects to capitalise on the growth in the segment going ahead with most competitors exiting the space.

Maruti Suzuki Managing Director Hisashi Takeuchi said one million premium hatchbacks alone are expected to sold in the country by FY31, up from 680,000 units last fiscal. “We sell decent volumes, make money on these cars. We have very high market share in small cars. And as the economy grows, the the market will revive, we will grow because others have stopped sales in the space,” he said on the sidelines of the launch of the new Swift priced between Rs 6.49-9.64 lakh (ex-showroom, India).

Small-car sales fell 12% in FY24 when the passenger vehicle industry grew 8.7%, led by robust demand for SUVs. The share of small cars in overall vehicle sales stood at 27.7%, down from 34.4% in FY23 and 47.4% in FY18. Maruti Suzuki leads in small cars with a share of 69%.

“Vehicle prices at the entry level went up much faster than income levels of buyers the last few years, which impacted demand,” Takeuchi said. Increases in input costs, insurance charges, road taxes, and the transition to higher emission and safety norms, among others, led to a spike in prices in the price-sensitive, small-car and two-wheeler segments, hitting demand.

Sluggish sales prompted several automakers including Nissan, Honda and Volkswagen, to exit the small-car market in the country over the last few years. The total number of models on offer in the segment now stands at 14, compared with a record 31 in FY16.

Takeuchi admitted the reduction in the number of models on offer in the market has also impacted demand in the segment. But, he said, with the government looking at making India a developed country by 2047, we can expect increased economic activity and robust demand for automobiles in the coming years. “With only 32 vehicles per 1,000 people compared to over 600 in developed countries like Japan, India presents a vast pool of car aspirants. As car ownership rises, the hatchback segment will serve as an entry point for many customers, and thus shall expand”, Takeuchi informed. The hatchback segment will continue to remain relevant for India, and the company’s focus on this segment will persist, he emphasised. Maruti Suzuki has invested Rs 1,450 crore to develop the new Swift. This includes investment in tools and dies for the vehicle as well as the new and more environment friendly Z-Series engine. The Swift comes with 6 airbags in all variants. Maruti Suzuki said starting with SUV Jimny, it has started introducing 6 airbags as a standard feature in all new models to enhance vehicular safety.

The new Swift will be manufactured at Suzuki Motor Gujarat plant, from where the company will serve customers in India as well as in overseas markets.

“For us to maintain our leadership position, it is important to cater to diverse customer segments. The hatchback segment in India continues to be a high-volume segment, accounting for approximately 28% of total passenger vehicle sales. Interestingly, the premium hatchback segment contributes nearly 60% of total hatchback sales. As a market leader, we took the responsibility to re-energize the hatchback segment at a time when this segment really needs a catalyst for growth. Also, we have a strong belief in India’s growth story,” Hisashi Takeuchi said.

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