Maruti Suzuki Takes Pole Position In SUV Segment

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#MarutiSuzuki takes pole position in the SUV segment with 25% market share. Senior Executive Officer Shashank Srivastava discusses July sales and more. #BQLive

Transcript

00:00 Welcome to BQ Prime. You're watching this interaction with Maruti Suzuki and joining

00:05 me is Shashank Srivastava, who is a Senior Executive Officer, Marketing and Sales at

00:09 Maruti Suzuki. Shashank, thank you very much for joining us today. Let's talk about the

00:15 numbers for July. Overall, it's a growth over previous July for you, but one segment continues

00:23 to be a lag, which is the minis and the compact segment. Can you tell us what exactly is happening

00:29 and is that a new normal for that segment going forward?

00:32 Yeah, it looks like because you know, the contribution of this segment, which was last

00:38 year on 34% of the total sales this month, it has come down. I mean, this April to July

00:46 periods come down to about 31%. So yes, there is a drop there. And earlier, it used to be

00:54 even higher, you know, the previous years. For various reasons, it has come down. And

00:59 one of the biggest reasons seems to be the affordability factor. In this segment, the

01:04 prices of the cars have gone up much more than the income levels and that has obviously

01:09 impacted. At the same time, the SUV segment has seen a large growth. In fact, in the month

01:14 of July, it almost touched 50% of the total sales. So that's a pretty large growth that

01:20 we see there.

01:22 It's almost compensating you for the minis and compacts.

01:25 Yes, it is. In fact, you know, we have as a conscious strategy, and we discussed it

01:31 last time, that while we continue to push for and retain our market share, which is

01:37 about 70% in the small cars, we would like to also expand in the growing segment. And

01:43 happily for Maruti Suzuki, in the month of July, we actually emerged as the number one

01:49 SUV maker in the country. Although cumulatively between April to July, we are like neck to

01:55 neck one and two, but in month of July, we were clear number one. And our market share

02:01 went up to almost 25% in July in SUV space. Something like last year, just for your reference,

02:08 last year, our market share was 12.1% for the whole year.

02:12 That's a huge jump. And that's primarily led by some of the new launches as well, right?

02:18 Invicto, Frans, what is it? Jimny. What is the kind of, you know, order book positions

02:27 there and have you seen some kind of respite with respect to the semiconductor issue?

02:32 Yes, so on the semiconductor issue, yes, as I mentioned, the July was the month where,

02:39 you know, this seems to, the issue seems to get much better as far as production is concerned.

02:45 That's what we saw in the month of July. So we had very good production of those models

02:49 where earlier we used to have this larger issue, you know, whether it was Brezza or

02:54 it was our TIGA XL6 and so on and so forth. So we could manage to reduce a little bit

03:01 of those bookings, which were pending for a very long time. But although even today

03:07 we have about 353,000 bookings, which are pending, but the situation is much better.

03:13 And going forward, we do hope that the semiconductor situation will continue to improve. Although,

03:20 you know, I'm a little apprehensive of giving exact timeline of when it would be absolutely

03:25 normalized because we still have not full visibility about the availability of semiconductor

03:31 components going forward, but it's much better. And I do hope that this problem will be behind

03:37 us shortly.

03:39 Last month when we spoke about that, you spoke about some of the production losses because

03:43 of semiconductor. Has that reduced given the kind of situation in the last one month and

03:49 going forward, will the losses be further reduced going forward?

03:53 Yes, absolutely. I think if you remember the figures I mentioned last time, 170,000 vehicles

03:59 was a loss last year, cumulatively for the whole year. And in quarter one, the loss was

04:05 about 28,000 vehicles. So up till June, this issue was there, but in July, there was hardly

04:10 any loss in this terms. There was a little bit of loss, but not any significant one.

04:16 And there, yes, we do hope and expect that going forward also the loss on account of

04:22 semiconductor component non-availability will be substantially reduced or not be not there.

04:29 Okay. Two questions which I wanted to check with you was, you know, we spoke briefly about

04:35 the mini and compact segment. Is there a way to revive this segment or price cut is the

04:41 only way there to revive this segment?

04:45 No, actually, you know, as I said, affordability is a factor there. And affordability is a

04:51 combination of the increase in price versus the increase in the income levels. And the

04:56 increase in price have been associated because of some of the regulatory requirements which

05:01 have come up regarding emission and safety. And also because of some road tax and registration

05:09 tax going up in many of the states. And obviously the commodity price increase obviously had

05:16 also put pressure on OEMs to increase prices. And the elasticity of demand is very high

05:22 in this segment. So these are very sensitive and the income levels haven't really gone

05:26 up in that pace. In fact, there seems to be an inequality in terms of jump in income levels.

05:33 And I think that will get better as the economy progresses and comes back to normal post the

05:39 COVID. And I think this segment's income level also should go up. And when that happens,

05:47 you could see some sort of a bounce back in this segment. By the way, last year, this

05:52 segment grew 20%. So it's not as if this is like a dead segment.

05:57 No, I'm not saying it's a dead segment. It's showing some kind of sluggishness because

06:02 of the stress which is there in the economy. And so my question was with respect to whether

06:08 you're seeing the stress coming in tier two or tier three cities, or is it coming from

06:13 the urban?

06:15 Because I think in this segment, it is across because there are, you know, even in tier

06:20 two, tier three cities at the higher end, also there are many number of consumers. I

06:25 mean, there is at the same time in the smaller car, the lower end, the entry level also use

06:32 in even in tier one cities, there are consumers, although less as a percentage, but still substantial

06:38 enough. But the behavior seems to be quite similar because the elasticity of demand seems

06:44 to be like roughly similar in irrespective of the geography.

06:48 The new launches have done well. Is there any other launches expected in the next six

06:54 months, given the fact that we are entering into a festive season? Are we looking at some

06:58 more new variants or new launches coming in?

07:02 So the specifics of our new launches were difficult for me to, you know, elucidate here.

07:08 But I must say that Maruti Suzuki has always been very bullish about introduction of an

07:19 upgradation of the models. And that is the reason why we have such a large portfolio.

07:26 And in fact, in the last one year, we have launched almost six new cars. The new Vitara

07:35 Brezza, the Frongs, the Jimny, the Vitara, the Grand Vitara, the Invicto, the Frongs

07:43 and so on. And that philosophy will continue for the future also, although the specific

07:49 models will be difficult for me.

07:52 How many products will you be able to, if not the specific, how many numbers?

07:57 So I think that's something which is also very difficult for me to tell here, because

08:05 it's also market moving and we cannot really divulge information that's market.

08:12 OK. Yesterday on Monday, you announced about the acquisition of the Gujarat plant. Give

08:21 me a sense of what kind of addition that brings into your capacity.

08:26 So the Gujarat plant capacity is about seven and a half lakh. And of course, this capacity

08:31 was available to Maruti Suzuki. Maruti Suzuki overall, if you has a capacity of about 22

08:37 lakh. So we have about 15 lakh combined, Gurgaon and Manesar, and about seven and a half lakh

08:44 from Gujarat plant. So that is the capacity which is there in SMG.

08:50 And going forward also, of course, we had said that by 2030, we would require capacity

08:56 close to 40 lakh, 30 lakh from the domestic market and about 10 lakh for the export and

09:02 the OEM supply market. And that is the reason why if you want to add up to another from

09:08 the current 21, 22 lakh capacity, you will need to put two plants. One is already coming

09:14 up in Karkoda, which is, you know, the work is going on. And last time we had said that

09:20 we will have another new plant, which we will be looking out for to add another capacity

09:28 to be able to meet the requirement of 2030 and 31.

09:32 Where is it going to come from?

09:35 That is still being studied. So it's, I think it was just about three months ago that the

09:41 board gave the approval and told the management to start looking out for this thing. So obviously,

09:47 that project report is still under preparation and different options are being examined.

09:54 And then a final location is, I mean, a location is finalized. We'll definitely let you know.

10:01 Shashank, you know, in 2015, when the Gujarat plant was in news, in the sense when Suzuki

10:07 wanted to set it up there, the narrative was that they're going to start with seven and

10:13 a half lakhs and then go up to 1.5 million over the next couple of years. But they've

10:18 not been able to scale it up to 1.5 million. Right.

10:22 I don't know whether you have got that 1.5 million right.

10:26 At that time, the communication was that, you know, it will be scaled up to 1.5 million

10:32 at some point.

10:33 Yes, I don't recall that because there were three plants and every plant had a capacity

10:38 of about two and a half lakh. So generally, a plant has two and a half lakh capacity.

10:44 Number of plants that you have multiplied by 2.5 gives you the capacity in a location.

10:48 For example, Manesar has three lines, A, B and C, each with two and a half lakhs. So

10:53 combined makes it seven and a half lakh. Kankoda has a plant for four lines, 2.5 multiplied

10:59 by four is 1 million. So Gujarat had three anyway. So that was 7.5 lakhs.

11:05 And is there enough space for increasing the capacity in Gujarat?

11:09 So exactly the point I was trying to make is that these new situations are a little

11:15 different. One, the volumes that we are expecting now are huge, as I just mentioned, 40 lakh

11:20 by 2030, the volume. Second is the number of models. So the number of models will have

11:28 also been increased substantially. And third, the number of locations. Remember, we have

11:33 these locations in Manesar, now Kharkoda, also in Gujarat. And you also have some capacity

11:39 from the Toyota plant. So to manage all this in an efficient way might be a little different

11:46 because you have to manage the logistics, both of the components as well as the finished

11:51 goods. So it's a little bit complicated. And I think that's the primary reason why this

11:57 decision which you were referring to was taken to add to the efficiency of operations going

12:02 forward.

12:03 So my understanding is that, and please correct me, the EV assembly line will also be part

12:08 of this Gujarat plant?

12:10 Yes, it was mentioned, our chairman did mention that, I think yesterday after the board meeting.

12:17 So what kind of, how do you deal with the batteries part of it? Because if EVs are there

12:21 and batteries, you will again source it to Suzuki, that would be again an arm's length

12:27 transaction which you will have to do with Suzuki, right?

12:29 Yeah, so those details, unfortunately, because it's not really my area, I'm...

12:33 No, I understand, I'm just asking. My job is to ask you.

12:38 Yeah, so yes, I know. So maybe this is still, you require a much more detailed exercise

12:45 to get all these details, all the questions that you have. And I'm sure when those detailing

12:56 has been done, we will obviously come up to you and explain exactly what those details

13:01 are.

13:02 Sajang, you have set up a target of 40 lakhs, 4 million units by 2031. When you look at

13:11 the composition of that, what component, what positioning will an SUV get, what positioning

13:19 will an EV get, what kind of product profile will be there for that 3031?

13:26 Yeah, so in terms of the powertrain, we have announced that 60% will be ice-based powertrain,

13:34 which will be like CNG, blended fuel, biogas, etc. 15% will be EV and about the balance

13:47 of 25% will be hybrids. So that is in terms of powertrain. In terms of the segment-wise,

13:54 you know, SUV versus hatches, etc. Those obviously is evolving. It will evolve in this course

14:03 of time of how, as we are just mentioning, how SUV segment is growing, how MPVs will

14:09 grow or how hatches will remain steady or that sort of thing. But in terms of powertrain,

14:16 the break-up is 60-15 and 25. 25 is hybrid, 15 is EV and 60 is ice-based, including CNG

14:25 and biogas and mixed fuels.

14:29 And EV, do you see that coming in next two years or three years?

14:34 Yeah, so we have announced that next year we will launch our EV. It's the mid-SUV. It's

14:42 called EVX. And we are making preparations for launching the first EV from Suzuki, which

14:52 will happen next financial year.

14:54 I'm assuming that it's going to be very price competitive to the current market.

14:58 Yeah, so we are always conscious about our price strategy and competitiveness. Although

15:04 EVs inherently, you know, the prices are higher because of the battery prices and that we

15:10 have, of course, plans to localize the battery. And that is why I'm sure our price will be

15:16 competitive.

15:17 Shashank, it has been a pleasure talking to you today and always, actually. Thank you

15:23 very much for joining us on BQ Prime.

15:24 My pleasure. Thank you.

15:26 Thank you.

15:27 [BLANK_AUDIO]

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