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17 years on, Maruti still commands 50% share of Indian car market

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It could have been Renault and not Suzuki to own half of the Indian car market had the French car maker put in some serious thoughts about the invitation from the government of India to form a joint venture in early 80s.

Renault could not meet the pricing parameters set by the Indira Gandhi government. So, to bring to life her son Sanjay Gandhi’s dream of making a common man’s car for India, the government went ahead to join hands with Suzuki Motor Corporation.

By end of July Maruti Suzuki’s (MSIL) domestic market share stood at an enviable 51 percent, the best from the time Suzuki Motor Corporation (SMC) became a majority shareholder in the joint venture. Its best-ever market share came in 1997-98 when Maruti Udyog (as it was known then) clocked 83 percent share.

Maruti’s closest competitor Hyundai, which entered India in 1998, has only 16 percent share, as of today. Renault, which ultimately entered India in 2005 through joint venture with Mahindra & Mahindra (M&M) to make the Logan, has not covered much distance either. By end of July the French company had a share of just 3 percent while the JV with M&M was dissolved in 2010 itself.

While the competition continues to struggle Maruti has gone from strength to strength. MSIL became the biggest and most profitable subsidiary of SMC in the 3 million strong, world’s fourth largest Indian car market. From 3.52 lakh units clocked in 2001-02 MSIL closed last financial year with volumes of 1.44 million units, a four-fold rise.

Unlike competition where only one or two models lift volumes for the whole company (for instance Ford, Renault, Honda, Toyota, Tata Motors) Maruti’s sales are dependent on at least six models. Alto, Wagon R, Swift, Baleno, Brezza, Dzire clock more than 10,000 units every month for the car market leader.

Alto (800cc and 1000cc) generates 17 percent of the volumes of Maruti Suzuki selling an average of 21,000 units every month. This is followed by the Swift with average sales of 15,000 units a month. Both the models have not received any significant upgrade in the past few years.

Maruti’s annual production capacity is at 1.55 million units excluding the initial installed capacity of 250,000 units a year at Gujarat which is owned by SMC. This additional capacity takes care of the capacity constraint Maruti was facing during the whole of last year.

“We are expecting a double digit growth this year. The company is on track to achieve 2 million sales by 2020. Beyond that sales may increase to 2.5 or even 3 million per annum”, said R C Bhargava, chairman, Maruti Suzuki India at the recently concluded annual general meeting.

Recently the company marched past Tata Motors in valuation to become the highest valued automotive company in India. This is despite the fact that Tata Motors has Jaguar Land Rover in its kitty.

But there is no dearth of new companies eyeing opportunities in India. Yet another French company Peugeot is gearing up for a second innings in India. SAIC, China’s largest car company is preparing the MG brand for India whereas Kia, a sister company of Hyundai also has finalized plans.