Maruti Suzuki, the country’s largest carmaker, appears to be in a slump. The brand, which continues to see its cars feature in the top 10 best seller list every month, has witnessed month-on-month decline in sales, precipitated by the second Covid wave and the superconductor chip shortage, both events having briefly halted production.
In September, sales of Maruti declined 46.16 percent with 54.9 percent fall in domestic sales as several of its models, including best-sellers such as the Swift, Celerio, Baleno and Dzire, witnessed a 75 percent drop in sales from a year ago. Maruti isn’t alone in reporting a decline. Hyundai India, the second largest carmaker in India, also reported a drop in domestic sales by 23.6 percent compared with the same sales quarter last year.
Standing in direct contrast is Tata Motors, which although doesn't deal with the same volumes as Maruti Suzuki, is witnessing a resurgence in popularity garnered on the back of bold design work, emphasis on safety and a head start in the EV game. In the first quarter of 2022, Tata Motors upped its total revenue by 107.6% year-on-year.
Tata also managed to see tremendous growth in the EV space, thanks to the Nexon EV, which surpassed 1,000 units in sales in a single month (August) for the first time. In September 2021 alone, Tata recorded a 26% growth in domestic sales at 55,988 units. Of course, Maruti Suzuki still manages to outsell brands such as Tata Motors, MG, Nissan by a considerable margin, month-on-month and so the scales aren’t exactly comparable. But they appear to be getting there. In what appeared to be its leanest September in recent times, this year Maruti Suzuki sold 86,380 units while Tata Motors sold 55,988 units.
Shifting customer choices
However, Tata’s popularity points towards a shift in the consumer mindset, which is no longer as bargain-conscious as Maruti Suzuki was betting it would be. In fact, recent statements by Maruti chairman RC Bhargava have appeared a tad anachronistic, particularly with regards to emissions norms, Global NCAP safety ratings and electric vehicle technology.
At a recent SIAM convention, Bhargava used the entry-level car buyer’s limited purchasing power to explain the brand’s reticence in rolling out a budget electric vehicle. The company chairman doubled down on this claim while addressing a virtual conference on the company’s second quarter earnings, stating that the brand will only add an EV in its portfolio after 2025.
Maruti Suzuki’s strategy to counter rising fuel prices, is avoiding the EV route and focusing on its CNG portfolio instead, which currently comprises 11 models. To the brand’s credit, it sold a record 1.57 lakh CNG cars in FY21. But the longevity of CNG-powered cars remains to be seen, at a time when the central government is evidently pushing for better EV infrastructure.
If Maruti Suzuki is to enter the EV race, by 2025, it would find its lone electric offering outnumbered by 8 from Tata Motors. At present, Tata has announced launching a sum total of 10 EVs by 2025. Bhargava has stated that Maruti Suzuki would need to see a much higher demand in EVs and the sale of over 10,000 units a month, to justify prioritising EVs.
The EV game
However, a brand’s success in the EV space goes beyond the presence of EVs in the product portfolio. For a brand to successfully tackle the EV challenge, it must invest in the EV ecosystem, which includes local battery cell manufacturing, battery recycling and a nation-wide charging network.
With the Tata Group deploying all its subsidiaries to become end-to-end solution providers for the ecosystem, not to mention setting-up a separate EV subsidiary, it would be hard for Maruti Suzuki to maintain its position on the top of the volume and sales charts in the coming decades. Especially considering the fact that Tata Motors has already entered the budget EV category with the Tigor EV, and will continue to edge closer to the entry-level EV category with an electric Tata Punch.
Maruti Suzuki’s portfolio, which is due to be renewed with several upcoming updates, has also started to look a bit outdated and long in the tooth while the brand has, by its own admission, applied cost-cutting measures in light of the rise in raw material prices. In many ways then, Maruti Suzuki appears to be applying a formula that caused the failure of Tata Nano.
As a budget offering, for the budgetarily conservative the erstwhile Nano was stripped of its own aspirational value by the brand which showcased it as the lowest common denominator of cars. Traditionally, the Indian market has been attracted to the concept of more for less and the Nano represented the idea of less for less. Cars such as the Alto and the SPresso appear to be going the same route.
Long after the Nano’s discontinuation, Tata Motors appears to have learnt its lesson. Its recent slew of launches display the brand’s focus on creating cars with exciting designs that go beyond the realm of functionality and practicality. Apart from the emphasis on design, and a steady improvement in cabin quality, Tata has had one clear ace up its sleeve: safety.
The Tata Punch recently became the third product from Tata Motors to receive a five-star adult occupant safety rating, alongside the Nexon and the Altroz. Maruti Suzuki’s cars in comparison haven’t fared as well. The Swift, one of Maruti Suzuki’s best selling cars has routinely received a 0 safety rating, most recently by the Latin NCAP crash test.
On October 28, the India-made Maruti Suzuki Baleno also secured a zero-star safety rating. One of the reasons cited was the lack of standard ESC (along with side head protection airbags) a feature that’s absent across the Tata Punch range. However, the Punch, which sits below the Baleno’s “premium hatchback” segment, features “Brake Sway Control” which controls lateral movement of wheels while mitigating wheel lock under hard braking.
Entry-level cars like the Maruti Suzuki SPresso received an abysmal 2-star rating by Global NCAP. In the past, Bhargava has been vocally dismissive about Global NCAP’s findings, stating that it’s cars are built in accordance with national crash test parameters, which are set at a lower standard speed of 56kph as opposed to GlobalNCAP’s 64kph. Once again, the cost angle was presented as the main reason why certain standardised safety features were absent from the brand’s cars base models, across segments.
At present, it appears that Maruti Suzuki’s fixation on volumes and cost-effectiveness of vehicles, might be myopic. Yes, its sales and service network remain the best in the country, by a mile and its production numbers are yet to return to normal.But if customer preferences are evolving to be more attuned to driver, passenger safety and vibrant design - the brand might be weakening its long-term prospects. For now, it needs to commence sales of some exciting international products, such as the Jimny and possibly the Swift even if the volume argument works against them. And while it questions the tax policy with regards to CNG cars, Maruti Suzuki needs to come aboard the EV train, at the earliest.