Why Maruti prefers affordable cars when entering the luxury segment

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With Maruti Suzuki holding 52.54 percent of the mass passenger vehicle market share, some of its shareholders want the company to think bigger and enter the luxury segment, but is happy to focus on its business. strength.

At the company’s 37th annual general meeting on Thursday, one of the shareholders told management that it was time for Maruti Suzuki to consider competing with brands like Mercedes-Benz, BMW and Audi. .

The logic behind the suggestion was that MSI already had over 50 percent market share in the mass segment and it was time to move up the value chain.

Responding to the suggestion, MSI Chairman RC Bhargava said the company’s effort would be to provide features found in luxury cars in the company’s affordable products.

“Today we have the new Ciaz, which has many of the features found in ‘premium sector’ cars and at a much lower cost,” he said.

Bhargava added: “Remember India is a country where people are very price sensitive (and) affordability is a factor.”

He also said that selling high-priced, low-volume products was not in line with the company’s strategy.

“Maruti’s strength is in large-scale bulk manufacturing,” Bhargava said, adding, “and the low-volume sales, which some of the high-end manufacturers do, just don’t fit our business model.”

He said, however, that this does not mean that the company’s customers would be deprived of premium features.

“We will continue to improve our cars and we will continue to improve the value we place on our customers, but this decision about which cars we should manufacture, I ask you to please let the board decide,” said Bhargava.

During the April to June period of the current fiscal year, MSI’s market share in the passenger vehicle market increased to 52.54 percent from 50.43 percent during the period of the previous year.

The company sold 4,58,967 PV units in the April-June period compared to 3,67,386 units in the previous year period, a growth of 24.93 percent.

For the industry as a whole, domestic PV sales in the first quarter of the current fiscal year increased 19.91% to 8 73,501 units from 7,28,483 units.

Responding to a concern about “stagnant margins” raised by another shareholder, Bhargava said operating margins were not entirely in the hands of the company, as many external factors such as commodity prices at exchange rate and world trade issues also played a role.

Despite this, he said MSI’s operating margins “were higher than any other automotive company in India” and among the best in the world.

Earlier, speaking to shareholders, Bhargava said the potential trade war between the United States and China could lead other countries to be drawn into this unfortunate course of events as well.

“Oil prices and the Iranian problem create great uncertainty over energy costs this year. Both of these events could lead to offsetting some of the benefits of the positive factors,” he added.

Bhargava pointed out that the healthy growth of the economy, the good monsoon and the tax compliance under the GST allowing the businessmen greater investments for the modernization and growth of their businesses are major positive factors.

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