From gaining 22 per cent market share in the sports utility vehicle (SUV) segment to record exports, Maruti Suzuki India is set to register a volume growth of 8.5 per cent in 2023r. Shashank Srivastava, Senior Executive Officer, Marketing and Sales, Maruti Suzuki India Limited, spoke with Businessline on the company’s plan for 2024, inflationary pressures, demand for entry-level cars, and ramping up production.
How was 2023 for Maruti Suzuki India Limited?
With solid performance from our new SUV models, we became the No. 1 manufacturer in the first half of FY23-24. Our SUVs have witnessed a phenomenal 139 per cent growth and doubled their market share from 10.5 per cent to 22 per cent in CY 2023. We witnessed the highest-ever exports. All in all, we expect the combined sales to cross the two-million mark. Although SUVs are the top segment, some sales growth is also expected for premium hatches, MPVs [multi-purpose vehicles], and vans in CY2023. Furthermore, the bottleneck caused by the semiconductor shortage has eased since July. This has helped reduce the backlog of one million pending bookings to 500,000, further boosting sales figures for the industry.
Inventory with dealers remains high. What is the company doing to reduce the inventory?
December typically sees higher retail sales and reduced wholesale figures. This trend, observed last year with 275,000 wholesale units compared to 411,000 retail ones, is expected to repeat this year as well, helping to reduce inventory hangover in the new year. OEMs [original equipment manufacturers] are typically looking to reduce stock by pushing fewer vehicles to dealerships in December, preventing potential oversupply issues in the coming months. The inventory, by industry estimate, is around 30-32 days, though for some models it is higher.
The company plans to achieve a market share of 50 per cent in the SUV segment. What is its market share with the new launches?
Our market share in the non-SUV space is high, about 65 per cent. Until last year, our share in the SUV segment was 10.5 per cent, which is significantly less than our market share in other segments such as hatchbacks, sedans, and MPVs. The SUV segment has been the fastest-growing, accounting for around 49 per cent of the market share.
The launch of Jimny, Fronx, Brezza, and Grand Vitara helped us reach an industry share of 22 per cent in the SUV segment. We aim to grow this to 33–35 per cent to achieve an overall market share of 50 per cent from the existing 43 per cent in the passenger vehicle segment. Product intervention and production capacity building will be the growth drivers for this. While we are optimistic about achieving the coveted 50 per cent market share with help from our SUVs, our strategy is also to consolidate and retain our share in other segments.
How was the festive season for Maruti Suzuki Limited?
The festive season, which spanned from Onam to Bhai Dooj, resulted in record-breaking growth of about 18 per cent over last year. A 90-day time frame this year, along with the availability of semiconductor chips and backed by a strong production ramp, led to the industry breaking new records and crossing one-million deliveries for the first time. We are optimistic about our continued success, with Maruti Suzuki expected to contribute significantly to the industry’s projected annual sales of about 41 lakh units.
The company is set to increase vehicle prices from January. Do you foresee the volatility continuing and what will be the impact on sales?
Automobile sales are expected to see flat growth in 2024 as compared to this year. Therefore, carmakers will try to limit price hikes. For an OEM, 75-77 per cent of the cost of a vehicle is the material cost, and any increase therein impacts the price of the vehicle. And despite our best efforts, overall inflation has compelled us to pass on some of that increased input costs to customers by hiking the prices of cars from January 2024.
Our pricing strategy is intricately linked to various factors, including commodity prices, operational costs, and economic conditions. Price hike is the last resort and we aim to offer customer value through increased cost-efficiency and productivity
Do you see hatchbacks and entry-level cars making a comeback in 2024? What is MSIL’s market share in the segment?
Hatchbacks and entry-level cars still bring in substantial volumes because we still do not have an evolved public transportation system, and the need for private mobility has been very high. This segment remains relevant, with MSIL’s small car sales at about 8.8 lakh, which exceeds even the overall sales of our nearest competitor.
Affordability has been a key concern, with the rising input costs and expenses incurred in meeting various norms, including safety standards. The demand for modern features has further added to the cost, making small cars relatively expensive over time.
The prevailing economic conditions, marked by overall inflation and increasing interest rates, have introduced additional challenges. While the impact of the increased repo rate has not been fully transferred to customers, we anticipate this adjustment to happen in the upcoming year. This rise in interest rates is expected to exert further pressure on the demand for small cars.
Compounded by low rural income, the scenario presents a challenge for the growth of small cars and hatchbacks next year.
What is MSIL’s plan on ramping up production of the high-selling utility vehicles?
We have noticed that buyers are looking at the overall experience of a three-row vehicle. It is no longer only large families opting for MPVs, but also young couples or even office-goers. Maruti Suzuki has a market share of over 50 per cent in the MPV segment, and much of its success goes to Ertiga and XL6, which are the bestselling MPVs in FY23. This has helped Maruti Suzuki remain No. 1 in UV sales for the last six years.
There is, however, a need to ramp up our focus on the UV segment to capture a larger market share. Increasing production capacity to expedite delivery is an integral step in that direction. To this end, we are investing heavily to increase production. We are targeting doubling our production capacity to around 4 million over the next eight years
In 2024, what trends do you foresee in the Indian automobile market?
It will be safe to say that SUVs will continue to be in demand next year as well. The SUV segment in India has demonstrated substantial growth, recording a 26 per cent increase in the current calendar year.
We also expect a growing preference for vehicles with a lower carbon footprint and running costs in 2024. In line with this, we anticipate a surge in demand for CNG [compressed natural gas] products and strong hybrid vehicles. Hybrids, as per our assessment, make for a strong proposition for customers seeking clean, fuel-efficient options without having to deal with the range anxiety associated with EVs [electric vehicles]. This is reflected in the sales of strong hybrids; notably, strong hybrid cars in India outsold EVs from September to November in 2023 — 24,062 strong hybrids versus 21,445 EVs.
Another factor impacting customers’ buying decisions in 2024 will be modern gadgetry such as connected technology, large infotainment systems, heads-up displays, sunroofs, and ventilated front seats. We’ve observed that customers across almost all segments are looking for aspirational technologies and creature comforts rather than mere functionality. This shift in buying preference is expected to considerably impact their decision.
As per our initial assessment, 2024 is likely to see muted growth in the low single digits. We are studying this in greater depth to make a more definitive prediction.