Chennai, April 29 

The country’s top carmaker Maruti Suzuki India Ltd (MSIL) is looking at a major shift in its product strategy from its bread and butter low priced-hatchback segment to other categories for future growth. 

“Compared to 2018-19, the hatchback segment has shrunk by 4 lakh units in 2021-22, from 15.5 lakh units to 11.5 lakh units. This is more than 25 per cent decline in the size of the market. This used to be a major part of the market. Low priced cars became unaffordable for people due to regulatory changes, higher taxes by States, increase in commodity prices. We have only bread now, the butter has gone,” RC Bhargava, Chairman, MSIL, said while discussing the company’s annual results for FY22. 

Over the last three years, people from the low income group are not able to buy vehicles for commuting – be it a two-wheeler or an entry-level hatchback - as these vehicles have become expensive.  

“Prices have gone up by at least 32 per cent in the hatchback segment in the past three years,” said Shashank Srivastava, Senior Executive Director, Sales and Marketing, MSIL 

Rural vs urban markets

The growth percentage in the rural market is higher than in the urban markets. But growth itself has slowed down or has become negative, more in urban markets as compared to rural markets. Overall markets have not grown. It has shrunk. 

While the hatchback segment has shrunk, the non-hatchback segment has not recorded a big increase either. The non-hatchback segment has only grown marginally from 18 lakh units in FY19 to 19 lakh units in FY22. 

It was argued that the per capita income in India is about $2,000, about 5 per cent of that in Europe and Japan. This reduces the ability of a large population to buy upper-end cars. As a result, not only do two-wheelers sell in large numbers in India but about three-fourth of cars sold are less than 4 metres in length and lower in cost.  

“Policymakers and the Central government should take note of the trend in the hatchback segment where vehicles have become expensive for low-income sections of the people,” said Bhargava. 

He pointed out that hatchbacks would become affordable only through government measures and lower commodity prices.  

As demand grows in the non-hatchback segment, Maruti will focus on launching products in tune with the demand patterns in the market. It is planning numerous launches throughout this fiscal. “Today, the demand is not arising in the hatchback segment, it is arising in the upper segments,” said Bhargava. Hatchbacks, presently, account for bulk of the company’s sales.

SUV segment

It is planning to strengthen its presence in the SUV segment with the launch of new products. Maruti’s market share in the SUV segment in FY22 was about 11 per cent. The company’s overall market share was 65 per cent (without SUVs) and was 43.4 per cent with SUVs. 

The SUV segment mix (including MUVs) improved to 50.5 per cent in FY2022 from 43.4 per cent in FY2021 and 39.1 per cent in FY2020. The SUV mix in India has surpassed the global SUV mix, which stood at about 45 per cent in CY2021., according to a report of Kotak Institutional Equities Research.