Maruti sales being increasingly driven by bigger cars

Small is no longer the driving word for Maruti Suzuki, India's largest car manufacturer. In the last two years, Maruti's revenue growth is being driven by super-compact and mid-size cars, which have outpaced the mini segment.

The mini segment, which includes models like Alto and Wagon R, accounts for just 18.7 per cent of Maruti's revenues in the first half of FY16 - a sharp dip from the 22.6 per cent share of revenues in FT14.

During the same period, the super compact segment (with models like Dzire Tour) and mid-size segment (models like Ciaz) grew steadily in revenues.

The super compact segment's share of revenues went up from 1 per cent to 2.9 per cent while the mid-size segment's share went up from 0.6 per cent to 5.6 per cent, reveal numbers market shared by analysts with The Economic Times.

Maruti doesn't give a segment-wise numbers breakdown of revenues and declined to comment specifically on these figures.

However, Maruti chairman R C Bhargava says the trend is a reflection of the market changes. The trend is a big deal for the company which introduced India's first small, city car in 1983.

The mini segment's contribution to revenues is not just shrinking but contributes less than 15 per cent of the automaker's profits, according to a recent HSBC Global research report.

The report also states that within hatchbacks, premium hatchbacks have been growing at a faster clip for the company.

The recent spate of launches like Ciaz , Ertiga, S Cross, and more recently Baleno seems to suggest that the company is aware of the trend and increasing its focus on high-end cars.

"We will offer what the customer wants and will never ignore the small car segment," says Bhargava, explaining that there are a lot of first-time buyers who are still upgrading from bikes to cars.

Industry watchers say that there is a fundamental change in consumer buying pattern. "With per capita income having doubled in the last 10 years, the entry (mini) segment is slowly losing its relevance, as consumers want better cars," says V G Ramakrishnan, senior VP at Frost & Sullivan.

So far, Maruti's attempts to make inroads in the premium segment with models like the Kizashi, the SX4 or the Baleno sedan haven't set the market on fire.

Bhargava expects volumes of the upper segment to grow faster, which will have an impact on profitability. Maruti straddles the whole range of cars from entry level to C segment cars. "We will soon launch a compact SUV too," says Bhargava.

Experts believe that Maruti is well positioned to retain its huge customer base.

"Over the years Maruti has built a huge customer base and when a customer wants to upgrade, he can be retained within the Maruti family if there is a product at different price points," says Rakesh Batra, Partner and National Leader Auto Sector, Ernst & Young. "Consumers want better and technologically superior cars and for the company it means more profit per car."