How did 2022 fare for the country's leading automaker? How has Maruti Suzuki's marketing playbook evolved over the years? How is it responding to the preferences of a younger generation of consumers and upgrading its legacy brand positioning that had become less aspirational over the years? Shashank Srivastava, Senior Executive Officer (Marketing and Sales), Maruti Suzuki India, answers all these questions and more in a conversation with Storyboard18. Srivastava also shares insights into how Maruti's calibrating its brand portfolio to make it future fit and his views on sustainable mobility and electric vehicles.
What is your outlook for 2023 given the challenges that you and your peers are facing - everything from inflationary headwinds, geopolitical issues and the semiconductor crisis to changing consumers and cautious spending?
The outlook for the financial year 2023 is actually very good because the demand parameters have held very stable and, in fact, have risen. We have seen a revival of demand, possibly a little bit of pent up demand, but also new demand. That means that this year we are seeing very good sales overall. In fact, for the passenger vehicle segment, we are looking at the figure of 3.85 million. This is the highest ever sales in a financial year for the Indian automobile industry. If you see the calendar year, which is January to November 2022, the industry crossed the 3.5 million mark and the previous highest being 2018 at 3.38 million.
How has Maruti’s marketing playbook changed over the past few years given increasing competition, fundamental industry shifts and a new generation of consumers that has a very different outlook on consumption compared to previous generations?
The marketing playbook has evolved in response to the consumer behavior pattern changing and the economic growth pattern that our country has seen. So, for example, 40 years back when we started, the volumes were pretty low. Our GDP per capita was less than $1,000. It has grown now to $3,000 per capita, and that has also made significant changes in the type of cars that people want and also in the number of cars that people want.
We have seen volumes have grown dramatically from just around 50,000 per year to 38 lakh today. The penetration of cars in India 40 years back was just about 2.5 per 1000 people. Today it is around 30 per 1000 and expected to go up to almost 70 in the next 4-5 years. That has been the pattern, and remember the automobile industry is sort of a bellwether industry, very closely related to economic growth in the country.
The industry has grown and consumers have also changed. It's not just about the volumes, but also consumer patterns. The first time buyers were about 75-80 percent but today they are about 45-47 percent. Still very high which means that India is a growing economy with a young population - 65 percent of the population is below 35 years of age.
For first time buyers the choice is still largely functionality, but there is this large chunk of consumers, 50 percent or more, who are either replacement buyers, which means they are upgraders, or they are additional car buyers, which means they are adding more cars to their possession. Their behavior is quite different. So you see the average price is going up.
Also the requirements for design and features are also getting a little more evolved. In terms of the demography as well as psychography, there is an evolution that we have seen rapidly coming in the Indian landscape.
Then there’s the digital aspects of the buying behavior and the retail experience and hence the showroom infrastructure has changed, given the amount of research that consumers already do when they walk into the showroom. The changes are accelerating all the time.
Can you share some examples that exemplify future-facing marketing strategies for Maruti Suzuki?
Maruti Suzuki as a brand was generally known, as it is still known, for value for money, great fuel efficiency, low maintenance and wide network, and therefore ‘peace of mind’. That was something which went very well with the previous generation consumers. Because as I said, India was still evolving in terms of behavior of consumerism as well as economically.
First-time buyers were about 75-80 percent but today they are about 45-47 percent. That's still very high, which means that India is a growing economy with a young population - 65 percent of the population is below 35 years of age.
After some time the priorities of consumers when they were making choices for buying cars, especially the younger people, changed because they had a higher income level. Financing was available and much easier. They were more exposed to global conditions. Therefore we did find that we need to create a brand that is more aspirational in nature. So one of the negatives which we had found in that ‘value for money’ and the ‘peace of mind’ sort of brand positioning was that it sort of became less aspirational over time. Sometimes Maruti Suzuki was associated with a slightly older or conservative consumer and the number of people who were no longer conservative and were modern in outlook was increasing and getting younger.
How did you respond to that shift?
So we made the channel brand Nexa which is more aspirational to give that global experience to the consumers as far as car buying is concerned. And, of course, you need to do all those marketing activities that you can charge a premium for.
The digital transformation is ongoing. We found that the younger consumers and, in fact, even some of the older consumers are now more keen to do transactions, at least a large part of it, through digital means. 24 out of the 26 consumer touchpoints we have digitized including financing. So increasingly we find a large number of retails, almost 23 percent, and 35-36 percent of all inquiries coming from the digital platform. It is going to be the future of automobile retail.
Earlier we said it's not possible because people want to kick the tyres or smell the leather, therefore they visit the showroom and of course the salespeople have a great influence on their purchase behavior. But we found that almost 90 percent of consumers now are reasonably sure which car they want to buy even before they call the showroom.
Maruti has always been seen as a family, economical and mass brand. But what is the future portfolio strategy? How are you calibrating the portfolio to make Maruti-Suzuki future-ready?
The future is sort of unknown and you need to make decisions regarding the future. But you are making some assumptions which may or may not come true. Having said that, we do see movement towards a large percentage of SUVs rather than sedans. Small cars will still remain a significant portion of the overall portfolio of the industry sales.
Today almost 90 percent of consumers now are reasonably sure which car they want to buy even before they call the showroom.
However, SUVs are big and our overall strategy is to get to 50 percent market share in the medium term. In the non-SUV area our market share is over 65 percent and growing. Whereas in the SUV sector, we are lagging behind a little. Obviously we need to focus on strengthening our portfolio in SUVs and we are trying to do that quickly. We have just two vehicles out of 46 brands in this segment. So the fair share of market share will be about 4 percent and we have around 11-12 percent at the moment.
Secondly, in terms of consumer processes, we have tried to build the Nexa brand for that aspirational element. Now, when we dice it up by the type of consumer - first time buyer, additional car buyer and replacement car buyer. For the additional car buyers, our market share is a little low. In the first time buyer category we have a very good market share as also in the replacement car category. So that is something which we are focusing on as well.
Thirdly, I talked about our focus on the processes of buying, but we are also equally focussed on consumer convenience based on technology features which help customers make the choice in favor of Maruti Suzuki.
How are you responding to the opportunities and the challenges of marketing future mobility solutions? We are seeing a lot of action and ambitious plans being laid out by your competitors.
The other big thing, which the industry is grappling with, is the future of sustainable mobility. There is a consensus in the industry that electric vehicles will be the mainstream going forward. However, there is no consensus on how quickly it will happen. So the question is not whether but when.
If you look at what analysts say, in India about 17-18 percent of the market in passenger vehicles will be electric cars by 2030.
Unless the cost of acquisition comes down for the general consumer, you wouldn't see the great jump in EVs that everybody is expecting.
Now the projected passenger vehicle industry in 2030 is around 6 million. So out of that 6 million, 1 million will be electric. But what happens to the other 5 million? Because you have to be concerned about emissions of those 5 million cars, if you're really concerned about the environment. So at Maruti-Suzuki we will have a mix of technologies. Till the time electric vehicles become mainstream we will have a mix of technologies to try to reduce emissions in the environment.
More practical at this point are strong hybrids because EVs are not growing at the current price points, which is 1.5-1.6 times the corresponding gasoline prices. Unless the cost of acquisition comes down for the general consumer, you wouldn't see the great jump in EVs that everybody is expecting.
The interview first appeared on CNBC-TV18. Catch Storyboard18 on Moneycontrol, CNBC-TV18 and Forbes India.