New Delhi: A quiet reversal in fortunes may have already begun in the passenger car market, where premiumisation has been the buzzword for the last several quarters. Cars over the INR 10 lakh mark and SUVs have seen rising sales as the entry level hatchbacks declined steadily. But in October this year, as the festive spirit lifted overall car sales, the entry level hatchback segment made a surprise comeback.
Maruti Suzuki India, which accounts for an overwhelming share in this segment, reported a 10% year on year growth in the sale of entry level hatchbacks. Has the return of the rural customer to car showrooms led to a revival in the entry level hatchback segment?
“Of course. Rural sales did well this festive season due to bountiful rainfall, which led to good crop yields and therefore a boost in rural incomes. Generous minimum support prices from the government also helped. The entry level hatchbacks had been declining even in the first quarter of the fiscal (April-June) this year but last month, the segment showed 10% growth,” said Partho Banerjee, Head of Marketing & Sales at Maruti.
According to data from the Society of Indian Automobile Manufacturers (SIAM), in the first half of the current fiscal year, combined domestic sales of mini and compact cars were nearly 6.24 lakh, down nearly 17% from about 7.5 lakh units in the same period of the previous fiscal year. Maruti sells Alto, Espresso, Baleno and Celerio in this segment. So the increase in October sales is certainly a benchmark. Will this trend continue? Banerjee said one will have to wait and see how the market responds going forward.
And what about sales in the urban geographies? Banerjee said that urban sales have also picked up during October though “not doing as well as” rural sales. He pointed towards the General Elections this summer among other factors for urban sales not keeping pace, adding “not too much should be read into the urban decline since SIAM itself has a forecast for 3-4% growth this fiscal”.
SUVs vs Sedans
The declining trend in sales has not just been an entry hatchback phenomenon – for many quarters now, even sedans have been relegated to the background as customers run amok in their love for SUVs. CEO and MD Hisashi Takeuchi said that it was important for Maruti to introduce refreshes in the entry level sedan segment too since the company wants to retain its total market share and presence in all segments of the passenger car market was essential for this goal.
It is probably with this objective in mind that the company today launched the fourth generation Dzire at an introductory price of INR 6.79 lakh for the base model. The new Dzire comes with a five star NCAP rating and several new features, including an electric sunroof. Takeushi said that the company has invested INR 1000 crore in developing the new Dzire and is looking to boost exports through the new model, in markets including Latin America and the Middle East. In FY24, 1.6 lakh units of Dzire were sold, he said, adding that Maruti has 61% share in domestic sales of entry level sedans.
So will Maruti launch a brand new sedan, developed from scratch? Takeushi said “if demand for a new sedan comes from customers, we will do that. But right now, there is more demand for SUVs and we need to launch new SUVs.” He said at their peak, sedans accounted for a fifth of all passenger cars but their share has now come down to just 8%.
Maruti EV:
On the Suzuki-Toyota partnership for electric vehicles, Takeushi said that while the basic technology for the electric vehicle (EV) has been developed by Suzuki Motor Corporation in association with Toyota Motor Corporation, “after that most of the development work has been done by Suzuki”. He declined to go into the specifics of the vehicles, but a statement from SMC had said earlier that it will be the first mass-production battery electric vehicle (BEV) model, called the eVITARA. Production of this model will start around spring of 2025 at the SMC plant in Gujarat and sales will happen in India, Japan and Europe.
In a joint statement earlier, Toyota and SMC has said “This new development marks the first EV in the relationship between the two companies. It will be launched worldwide, providing an EV choice even in the SUV market, which is showing remarkable growth.” Meanwhile Suzuki has spoken about launching five EVs in all, even as it continues to have a significant presence in alternate fuels and ICE technologies by the turn of the decade.
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