Moneycontrol PRO

Why is Maruti Suzuki buying land across India?

The company has so far spent Rs 1,500 crore to amass the land parcels. Read on to find out why

August 19, 2020 / 10:49 AM IST
 
 
live
  • bselive
  • nselive
Volume
Todays L/H
More

In the last four years, Maruti Suzuki has amassed 118 land parcels in India, costing over Rs 1,500 crore, to be given to dealer partners for showrooms and service outlets.

This is the biggest investment by any carmaker to secure dealership support for the future. Maruti Suzuki is preparing to defend its iron grip over the domestic car market.

“Network is one of the critical success factors and the land is the most important resource for its fast-paced expansion. Maruti Suzuki is buying and providing land parcels to its network partners at reasonable rental rates, thereby preventing stress on their profitability due to rising lease rentals,” the company said in its latest annual report.

Maruti Suzuki sold a total of 1.43 million units in India in FY20, down 18 percent from 1.75 million in FY19. Despite the decline, the Delhi-based company continues to control over half of India’s passenger vehicle market.

Suzuki Motor Corporation (SMC) hopes to continue to command that 50 percent market share in India from now through 2030, which would mean achieving sales of five million units a year by then. Sales of new passenger vehicles are seen increasing to 10 million units a year by 2030, as per SMC estimates.

Close

The Project

Maruti Suzuki has acquired 118 land parcels to set up sales outlets and service workshops on the CODO principle (Company Owned & Dealer Operated). Six pilot projects are being taken up across zones. The company did not specify the areas where these showrooms and service centres would come up.

“During FY20, the focus was to complete pre-construction activities and roll out the pilot projects in FY21. Based on the learning from these pilot projects, the sales and service facilities will be built on the rest of the acquired land parcels,” the Maruti Suzuki annual report added.

Maruti said it will continue to work on this initiative in future with a greater focus on setting up small workshops to increase service touchpoints. As of FY20, the company had 3,086 centres in its sales network, consisting of 2,390 Arena outlets, 375 Nexa outlets and 321 Commercial Vehicle outlets.

Suzuki plans to expand its India portfolio to 30 models by 2030, including electric vehicles. Its current model bouquet comprises 16 models, no electric cars and two commercial vehicles. To complement the growth in sales, the company is looking to add dealerships and take their count up to 10,000, which will be more than triple the number in FY20.

The Competition

This is not the first time that an automaker has invested in captive dealerships. India’s third-largest carmaker, Tata Motors, operated Concorde Motors for a number of years. The 100 percent subsidiary operated several dealerships across Delhi, Mumbai, Kochi, Bengaluru, Chennai and Hyderabad.

But mounting losses forced Tata Motors to shut down Concorde and sell the dealerships. This included the flagship showroom in Prabhadevi, Mumbai, spread over 4,400 sq. ft.

SAIC-controlled MG Motor India is opening experience centres across the country. The centre at Prabhadevi, located less than 100 meters from the Tata Motors showroom, is owned by the company. This was the second such centre opened by MG Motor after the first one (also company-owned) opened in Gurugram in 2019.
Swaraj Baggonkar
first published: Aug 19, 2020 10:49 am
Sections
ISO 27001 - BSI Assurance Mark