Maruti plans Ignis launch in Q4, to drive out 15 models by 2020

Festive sentiment this year has been better over last year. Added to it, good monsoon and disbursement of the 7th Pay Commission is giving a positive boost, says RS Kalsi, ED, Marketing & Sales of Maruti Suzuki.

Speaking to CNBC-TV18, Kalsi says that demand for both Brezza and Baleno has been more than company’s estimates. Maruti has a 33-week waiting period for Baleno and 27 weeks for Brezza.

Maruti has increased the production for Baleno by 25 percent to meet customer requirements. Ignis, Maruti's new offering, will hit the markets in the fourth quarter of this fiscal year, Kalsi says.

Maruti is aiming for double-digit growth in the current fiscal year.

The Gujrat plant, which will become functional in the fourth quarter, will produce 2.5 lakh vehicles. Baleno will be the first model to come out of this plant.

The company has exported 30,000 vehicles of which 19,000 have been done this quarter. Of the new models, Brezza has not been exported now.

The company has 15 new models in the pipeline, which will come out by 2020.

Below is the transcript of RS Kalsi’s interview to Sonia Shenoy on CNBC-TV18.

Q: A lot of people are telling us that festive demand has picked up quite a bit. What is your feedback?

A: I would like to say that at Maruti Suzuki, we celebrate almost every month like a festive month and every month we have something or the other exciting for the customers. Having said that, I would say that this festive season, begins like a wave from an Indian Ocean, it starts with Onam in Kerala and then comes to Maharashtra where Ganesh Chaturhti, then Navratri and then Dussehra and Diwali. So, it is a long run period for celebration.

Q: But has it been better than last year?

A: Yes, sentiment is much better, quite positive and a couple of macroeconomic factors for this. One is that monsoon has been good. So, it has given a very positive sentiment.

Second thing is that Seventh Pay Commission, those disbursements have started. Then overall factors, fuel prices being under control, inflation being under control, interest rates also little on softer side. So, all these factors put together are giving a very positive boost in the market.

Q: So, for you the Brezza has done well, more than 50,000 units, so congratulations on that. But you are facing some capacity constraints. So, what kind of run rate do you hope to see in your overall numbers over the next couple of months?

A: Whenever we plan our capacities and production volumes for a new model, generally we take the factors like sales in that particular category, how the market has been and also what kind of expectations customer has from us, the pricing part of it. All these put together, we have certain forecast models. But I would like to say that customers have appreciated, liked our products.

Q: What is the waiting period like on both Baleno and Brezza now?

A: The demand has been more than our optimistic estimates. So, as a result of this, today we have about 33 weeks waiting on Baleno and about 27 weeks waiting on Brezza, though we feel bad about it that customers have to wait for our products.

Q: So, your Haryana plant is running at full capacity. Do you plan to make way for the Baleno or increase production at Haryana and reduce it for your other products?

A: We have already increased the production by about 25 percent in both the cases than what we had planned earlier. So, we are trying to meet the customer requirements.

Apart from this, we are again playing with the volumes of different models. So, models on which we have more waiting, we are enhancing our production and other models, slightly, we are reducing the production so that we are able to fulfil our commitment to the customer.

Q: So, everyone is eager to know when the Ignis is launching. You did mention that it will launch before the end of the fiscal, but are we looking at a launch in the festive season itself?

A: I would like to say that this car would be coming on the Indian roads sometime in Q4. So, it will happen in this fiscal, but in Q4.

Q: In Q4, your Gujarat plant is also going to start, so what will you manufacture first there? Will it be Baleno, will it be Brezza and what is the production capacity going to be initially at the Gujarat plant?

A: Our first line will be operational from Q4 onwards and on a two shift basis, it can produce 2.5 lakh vehicles. To start with, because Baleno is in the waiting, we will start with that and gradually, we will add other models.

Q: Let us get to some numbers. You did about 1.5 million units in FY16. Even if you take a double digit growth, a 10 percent growth, that is 1.6 million by FY17 and a conservative 10 percent growth is 1.8 million by FY18. Is that a reasonable estimate in terms of overall sales?

A: I must say that you are quite right. But at the same time, in case market shows further buoyancy, we will be prepared to handle it. Though we talk about installed capacity at our Gurgaon and Manesar plant, our production people at least from manufacturing, they are quite innovative in terms of stretching that capacity through various innovative modes and we would be able to meet the requirements of the customer for this fiscal.

Q: So are you saying that you can even do 2 million is perhaps doable by FY18?

A: We are saying that is a target, but certainly our Gujarat plant will start supporting us from January onwards, so we will enhance our production and on a two shift basis it can give us 2.5 lakh vehicles for the whole year.

Q: So 1.8 to 2 million is a reasonable estimate for FY18?

A: I won’t like to put any numbers. We are committed to a double digit growth and we will do that.

Q: What about exports, because everyone is very keen after you started exporting the Baleno, what the overall target for export could be? Currently it 10 percent of overall sales, over the next couple of years how much do you plan to do and as a percentage of overall sales and will you look to export more models like the Brezza etc?

A: We will stick to say 10 percent and as our domestic market grows certainly export market will also grow. Having said that export market depend a lot on the economies of those importing countries and Baleno is one of our popular models which we are exporting and so far we have exported about 30,000 units and in this fiscal itself, we have exported 19,000 units. Apart from this we are exporting models like Alto, Celerio, Ciaz but at the moment we have no plans for Brezza for exports.

Q: So you won’t be looking to export?

A: We have to fulfil the domestic market requirements first.

Q: And over there, there is capacity constraint as well?

A: That is right.

Q: What is the pipeline looking like, over the next 6-12 months, how many new launches can we expect from the Maruti stable and how many will be from the SUV compact, SUV segment which is doing so well?

A: Compact SUV segment we have just entered and this question was coming from the market and from the experts and from all the media friends like you that why Maruti is not there in SUV. We entered this market with a big bang and today we have the market leadership position already in SUV and we have sold more than 50,000 units of Brezza.

Apart from this, two models, which we have declared already one is Ignis, other is Baleno RS will be coming which is a high performance compact engine, it is a turbocharged engine. Globally the trend is moving towards turbocharged the compact engine, which give more power and more performance.

Apart from this we have about 15 models in the pipeline, which will be coming up to 2020.

Q: Which segment do you think could do well over the next 6-12 months? Will it continue to be compact SUV so are you looking at some more premium cars after the success of Ciaz?

A: Again there was an apprehension of a question earlier that Maruti cannot be in the premium segment. We have been able to prove those people wrong, so today 3 of our products Ciaz, Brezza, Baleno are doing very well in the market place in the premium category.

Apart from this, I would like to say it is not either/or it does not mean that we are moving away from small car or entry level car, that is very much important for us and particularly a country like ours, where car penetration is very low and entry level market would always be there and our focus would remain there.

In the meantime, we would also be focussed on the premium segments and we will keep bringing new products in the segment.

Q: Do you think you can raise prices further, because there is an expectation that with your new models doing so well, the average selling price for Maruti could go up by another 5 percent over the next 2 years or so. Are you looking to raise prices for your premium products anytime soon?

A: It is not a matter of raising the prices, what happens is with the change in product mix, the overall ticket size moves up, that is how the overall revenue growth also comes apart from volume growth, it also comes from the kind of product mix that you are having.

Q: How much could selling prices go up by on an average over the next six months?

A: It is difficult to put any figure on that, because if we increase our prices those are based on the compulsions of commodity prices going up or foreign exchange becoming unfavourable, but otherwise we try to keep our prices at very, very optimum level in favour of the customer. It is not because our product is premium and there is a demand so we will increase the prices just like that, we don’t follow that policy. We try to give the best to our customers, not only in terms of products, but in terms of prices also.

Q: Then this brings us to the margins. There is a fear with the way the yen is moving that could put pressure little bit on margin. Do you think that would be offset by the exports that you are doing?

A: To some extent yes, but in case the impact is beyond a certain level then we will have to take a call, otherwise small fluctuations we don’t pass on to the customer, whether it is in terms of commodity pricing, fluctuation and/or foreign exchange fluctuation, so we will take a call moving forward.

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