Monday, 25 June 2012

Maruti Suzuki starts trial run of its 800 small car called Alto replacement - to be launched in November 2012

Maruti Suzuki India Ltd has accelerated work at its Gurgaon factory to introduce a fuel-efficient and technologically superior 800cc car around Diwali, as it seeks to boost sales of cars in a segment where its aging Alto hatchback is losing market share.The nation’s biggest car maker has started trial runs of the car and the remaining work on the model will be speeded up after the maintenance shutdown at its Gurgaon plant ends on 1 July, according to three people familiar with the development. They declined to be named.

“The new car has been designed very carefully, keeping in mind the competition and requirements of customers in that segment,” said a top company official, requesting anonymity.Normally, it takes three-four months for a car to hit the roads once it starts trial runs, said Hormazd Sorabjee, editor of Autocar India, the country’s largest selling automobile magazine.

Demand for the company’s entry-level 800cc Alto and Alto 1,000cc models have declined as customers preferred to buy diesel-powered cars as the price of the fuel is about 40% cheaper than petrol.In addition, the company is also facing competition from rival Hyundai Motor India Ltd, which introduced its low-cost Eon hatchback in 2011. In comparison, the Alto 800cc has not been upgraded since its introduction in 2000. The Alto 1,000cc, known as the Alto K10, was launched in 2010.

The new 800cc model appears to be a mixture of the A-Star and the Alto models. While the front of the car resembles the A-Star, the rear looks like an Alto. This reporter has reviewed photos of the car.The car is being developed on the existing Alto platform and will share an advanced version of the 800cc petrol engine that powers the Alto.A detailed questionnaire sent to the company on 22 June remained unanswered. A company spokesperson declined to comment, citing company policy.

In January, Maruti Suzuki managing director and chief executive Shinzo Nakanishi told The Times of India newspaper that the two models— the Maruti 800 and the Alto 800—had been in India for a “long, long time” and perhaps required an upgrade to meet current requirements.Lower demand for petrol cars, which form a majority of Maruti’s sales, has led to the company’s sales dropping by 11% to 1.01 million in the year ended 31 March. Sales of the Alto model also declined 11% to 308,288 units during the fiscal year, according to data by industry lobby Society of Indian Automobile Manufacturers (Siam).“At the bottom end, you can only have petrol cars. To attract consumers, the company will make sure that it is fuel-efficient,” said Sorabjee, referring to the fact that diesel-run cars are more expensive.

The 800cc models account for nearly two-thirds of the average 25,000 units of the Alto and the Alto K10 models that Maruti sells in a month in India.Maruti is expected to position the new car against Hyundai’s Eon. “Of course, it will be a fuel-efficient car, and with newer technologies, cost involved in the project goes up,” said one of the company officials cited above, indicating that the car may not be priced as low as the Alto.The company is, however, apprehensive about the positioning of the new petrol car in a market that has swung towards diesel.According to a second company official, the company is also discussing whether to discontinue the Alto model to give the new car proper space in the entry-level segment. “This move is being debated in the company,” said the official. “A section of people in the company still thinks that the Alto can still bring in decent volumes for the company. They are of the view that the new car should be placed between the Alto 800 and the Alto K10. A final decision is yet to be taken.”

The base variant of the Alto 800 sells at Rs2.32 lakh, while the K10 variant, which sports a 1,000cc petrol engine, sells at Rs3.20 lakh (ex-showroom, Delhi).Sorabjee said there is a possibility of that the introduction of the new car may result in customers preferring it over the Alto 800. “The question of the new car cannibalizing the Alto K10 does not arise, but there could be some cannibalization with the smaller Alto,” said Sorabjee.

Abdul Majeed, auto practice leader at PricewaterhouseCoopers in India, said cannibalization in the entry-level segment in India is bound to happen. “I don’t think they (Maruti) need to do anything different as far as customers get value for money,” said Majeed. “There are different sets of customers for every car in India and, above all, with the Maruti brand, you just need make sure that the product is good.”The company also sells the Maruti 800, which has been phased out from bigger cities as it doesn’t meet stricter emission norms. The company does not intend to upgrade its engine.

“There is a lot of inventory of the Alto with dealers. Any news about the new car will force customers to wait for the new car and will hence impact the Alto’s sales,” said a third company official.According to industry lobby Siam, the inventory of unsold petrol cars at Maruti was 107,508 units.


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