By : RACHNA TYAGI
Shashank Srivastava, Senior Executive Director, Maruti Suzuki India Limited, while addressing the past, the present, and the future, also discusses how cross-consideration isn’t really a big problem for Maruti Suzuki, how ‘fatigue factor’ vis-à-vis a segment does eventually set in, their two price hikes in less than six months, how the trajectory of technological progression depends on the consumers, as well as their design philosophy. Read on…
TOS: What’s with India’s SUV fascination, especially compact SUVs?
SS: If you look at the SUV segment, it has really been growing in the last few years. It used to be just around 11-12% a few years back, but now, it has become big with 32% of the market. The compact SUV segment is about 16.5% of the total market, which means 50% of the SUVs are now compact SUVs. The rest are mid-size SUVs and premium SUVs. Premium SUVs is only 0.5% and about 15% are the mid-size SUVs. The last few years is when we have seen a huge increase in SUVs. It used to be around 12% in 2012-13 and about16%, five years back. The 16% has now doubled to 32%. The entry SUV was just around 1% seven-eight years back, it was about 4% in 2015, and now, it is almost 16.5%, so it has become four times in terms of percentage of sales.
Also, when the Brezza came, in 2016, that’s when the volumes started climbing up. Last year the volume for the entry SUV itself was 4,45,000 out of the 60,000 total SUVs. Apparently, SUV is not only the fastest growing segment but it is also the only segment to have grown last year. In that sense this segment has seen a lot of action. Lots of new models have come into the fray since the success of Vitara Brezza. You have the Sonet from Kia, Venue from Hyundai, Nexon from Tata, XUV 300 from Mahindra, and so on. However, one good thing that has happened in the last couple of years is that the tide has turned towards petrol. That’s one big change. It used to be 85-88% diesel, now, diesel is less than 25% in this segment. The second change which we observe is that of course, while volumes have grown substantially, lots of first -time buyers are also going in for the entry SUV. What we find is that there is a lot of cross-consideration between the premium hatch and this segment.
TOS: Is it difficult convincing potential customers who are undecided between the premium hatch and the compact SUV about where to park their money?
SS: There is cross consideration between the premium hatch and the entry SUV and the price points have also sort of overlapped now. There was a time when clearly the SUVs were at price points much above the hatches, in fact, in most cases, above sedans too. But that disappeared ever since the four-meter category came in. The design preference also has changed for the consumer. But for Maruti, it is not a very big problem because we have products in the premium hatch segment also. We have the Baleno and the Swift. So, if the customer wants to buy from these segments, we are absolutely fine with it as we are also present there. In fact, the Baleno and the Swift, have been amongst the top five models for several years. The Swift, was the number one model last year, in the industry. The Brezza, with the 1.5-liter engine and almost 18kmpl fuel efficiency, also enjoys great preference within this category and that is why it is the market leader. You are right, increasingly you will find that there is cross consideration between these segments and in fact, this is happening not just with premium hatches but with entry sedans also.
TOS: Talking about sedans, do you think people will want to move to sedans soon? Do you think the SUV trend is on its last legs?
SS: In the future, you will see a lot of increase in the compact SUV segment. We are seeing that SUVs will probably grow for a few more years and therefore while we are very happy with the Brezza being the market leader, doing about 100,000 units a year. We would also like to continue with its success in the coming years as well, and that is also one of our main objectives in the SUV segment. That is why the focus on Brezza. Having said that, there is always fatigue with a category at some point in time, in other markets, as well. For example, sedans used to be 23-24% of the market just five years back, but it has started declining now and is just 10-11% of the market. Almost all the loss of sedans has been taken up by SUVs and it is not just because of the value they offer but also because of the design preference which is like fashion these days. And people who are currently buying entry SUVs or mid-size SUVs might start looking at Electric Crossovers, for instance, or even MPVs, whose volumes are also going up. So, we do foresee that for the next couple of years at least, SUVs will remain strong, and then the fatigue factor will set in and it will plateau after some time. At what point in time will the plateauing happen or when will the fatigue start is not very clear. In some countries it happens at volumes of 20,000, in some cases, in larger countries, it may not happen even at 5,00,000 volumes, so, there is a question mark about when and at what level will it happen, but there is no denying that there will be fatigue.
TOS: You’ve just had a price hike, has it affected sales of your compact SUV?
SS: Not yet. We had two price hikes, one was in January which was about 1.2% and another 1% increase in April and as you know that has been done because of the increase to our input cost, largely the material cost because the component cost has gone up. Steel, plastic, and precious metals like palladium and rhodium have increased the cost. Some of it… a part of it… has been passed down to the consumer so, overall, the January price hike doesn’t seem to have affected the volumes because the volumes were good. As far as the April volumes are concerned, other manufacturers also increased prices in April as well. We have to see how much it has affected us, because in April, we had the lockdown due to COVID-19 and several of our showrooms were closed, so, it is very difficult to estimate the actual effect of that price rise. But I think there has been a drop in sales in the second half of April, and I will put that down to having to shut outlets, because of the lockdown, more than anything to do with the price hike.
TOS: Has the semiconductor shortage affected Maruti Suzuki at all?
SS: Chip shortage obviously has obviously affected some of our models. It all depends on how much electronics are used and what chips are in shortage. But overall, if you see our Q4 numbers, and also a lot of people have commented on how Maruti Suzuki’s volumes and production have been very strong… one of the strong points that have helped us in this aspect is that we have a very wide portfolio, and in our portfolio, we can switch volumes from one model to the other depending on the market, of course. In terms of production, we can switch, and it is a luxury which is not available to many car manufacturers in the country because not everybody operates across so many models as we do. We have a very large portfolio which has helped us in overcoming a part of this crisis but yes, it is a global crisis and we also haven’t remained untouched because there are many models and variants where we could have seen higher production if the chips were available without any constraint. Our supply chain is doing a great job, trying to get as much supply of semi-conductors as possible.
TOS: What is the way forward for Maruti Suzuki? Are the new vehicles going to be all about Tech or are there going to be some vehicles for Purists as well, or are you planning to strike a fine balance between the two?
SS: It all depends on how consumers react to Tech. There will be some Purists and there will be some who will expect a certain threshold and they’ll be fine with that not wanting anything beyond that. How many people fall in which category is the question? I believe that going forward, you will see a larger quotient of Tech and Connected cars. In fact, that is the reason why we have ‘Suzuki Connect’ in our car which we offer as an accessory at this point in time where basic things such as vehicle performance or driving habits or geo locations, are common requirements of customers, not a Purist’s requirements, so maybe you’d want to know the location or vehicle diagnostics, in case of a problem, or if the vehicle is stolen, so these are things that everybody requires and these things will be introduced immediately. Going forward and seeing consumer reaction, we will know better. My feeling is that it will get more and more techy as we go along because consumers will also go in the same direction. You’ve seen this progression in cell phones too, that’s how smart phones came along. What was aspirational and desirable at one point in time has become hygienic now, on the cell phone, and the same will happen to other product categories, including cars.
TOS: What is the new design direction at Maruti-Suzuki?
SS: These days it is not just about power trains or fuel types or the features that are being offered, but also about design philosophy. Design philosophy has become very important, and we have seen this change in India, over a period of time. From being entirely conservative to being a little more edgy, is what you can now find in our design. That is also reflected in our design and dimensions as well. Look at our our old Swift and our new Swift, you will see how contemporary it looks. The Ertiga too. It is also not just about exterior design anymore, but also about the interior design and the ergonomics. Those are things that we keep studying. For example, even in our small cars you can see an SUV element, so, those are factors which also depend on the current design choices of consumers. It also helps build volumes for us if the models have such design elements, like the S-Presso for and the IGNIS, for instance. Every manufacturer studies this. Fortunately, we have large volumes, so even at the entry level where we have the S-Presso and the Alto. The Alto, can cater to people who are looking for a safer design and if they’re looking for a more SUV-ish type of design, there is the S-Presso. So, you can actually have multiple models with a different design philosophy. It has to be contemporary and youthful. Youthful is important because the average age of the buyer is also coming down over the years, so, that is another factor for design philosophy.
TOS: What is the profile of the compact SUV buyer and how many women are opting for them?
SS: If we look at the first-time buyers of 2015, there were hardly any compact SUV buyers, but now, among the first-time buyers about 5-8% are entry SUV buyers. That means they are buying cars for the first time and they go straight for the entry SUVs. If you look at additional car buying, which means, if you already have a car and are adding an additional car, if there 100 people buying additional cars, then earlier let us say around five-six years back only 5 % would buy compact SUVs as an additional car. Today 16% do that. In the replacement car market, which means you have some car already, you sell it off and upgrade to a new car… that used to be just 1-2% in 2015, today, for entry, it is 12% so that is a clear change. Even at the lower end, people are buying entry SUVs. If you look at how many buyers of SUVs are first time buyers, then if you look at the industry for entry SUVs, you have almost 30% now that are first time buyers. Additional car buying is at about 30%, so it is also quite a change because if you look at 2015, then the number of entry SUV buyers was not so large. Of course, it also depends on the number of models which are available. In terms of women opting for compact SUVs, well, that number stands at about 8-9%... that is the percentage of women who are opting for compact SUVs.