Two-wheel drive

Even as it seeks to attract new classes of buyers, Maruti Suzuki India is taking a close look at its cost structure.

As the society of Indian Automobile Manufacturers (SIAM) pondered over the state of the market at its annual convention in the capital, the country’s largest car maker was confronting numbers that did not make for terribly good reading. Sales in some categories are declining sharply, and while demand for the Swift and DZire has meant Maruti has continued to post respectable numbers, Shinjo Nakanishi, Managing Director, Maruti Suzuki India (MSIL), admits economic conditions are weak. But MSIL isn’t a slave to the conditions and is doing several innovative things across several functions to manage the downturn. MSIL is undertaking a ‘One Gram, One Component’ strategy to bring down the weight as well as material cost on its vehicles.

Riding out the storm: Maruti factory in Manesar near Gurgaon
Riding out the storm: Maruti factory in Manesar near Gurgaon
At the same time, the company’s planned capital expenditure continues on track, but it is figuring out ways to stretch its investment rupees further. MSIL is also keeping its recruitment and network expansion plans in place.

The company has taken a lead with its inventive use of the Internet, using social networks and video-sharing services for marketing its vehicles at a minimal cost compared to traditional mass media marketing. However, MSIL is also spreading its below-the-line activities, reaching out to more semi-urban areas not traditionally covered by the car dealer network. Car fairs organised in some of these areas have yielded significant sales. MSIL is also using its own employees as well as component vendors as ‘marketers,’ encouraging them to sell cars to friends, family and employees.

The company admits that in times of a slowdown, a surefire way of generating consumer interest is through new launches. Maruti’s DZire, launched a few months ago, is selling like hot cakes; later this year, the company will roll out the AStar and Splash, two new cars in the small-car segment.

There’s also a renewed thrust on exports. “While export volumes are low compared to domestic sales, any improvement in margins on the export front will also contribute to our bottom line in future quarters,” says an MSIL spokesperson. As Maruti’s Manesar plant increases capacity, models like the A-Star will be produced only in India for global markets; and with the dollar and euro climbing, international sales appear an attractive prospect.

The Maruti Suzuki way

• One gram, one component: With this programme, Maruti hopes to reduce the weight of components

• Plans to stretch its capital expenditure over a longer period

• Have more field events like car melas to ride on expected strong rural demand

• Export more: Ride on the demand for light, small, fuel-efficient cars

Industry review

Despite doomsday predictions rising interest rates and commodity prices, the auto industry has held up fairly well over the past few months. But at the convention of the Society of Indian Automobile Manufacturers (SIAM), the smiles were still broad and there were few signs of apprehension. Why? First, most auto majors have launched several new products over the past few months while withdrawing old ones, which according to SIAM Secretary General Dilip Chenoy has spurred the replacement cycle. Secondly, the motorcycle segment, which suffered a sharp decline in 2007-08, is climbing again after declining 11.9 per cent last year.

-4.7% industry growth in 2007-08
9.7% Industry growth in April-August 2008-09