With Maruti Suzuki India Ltd. commanding 52.54 percent market share of mass passenger vehicles, some of its shareholders want the company to think bigger and enter the luxury segment, but it is happy to concentrate on its strength.
During the 37th Annual General Meeting of the company today, one of the shareholders pointed out to the management that it was time for Maruti Suzuki to consider competing with the likes of Mercedes-Benz, BMW and Audi.
The logic behind the suggestion was that Maruti Suzuki has already has over 50 percent market share in the mass segment and it was time to move up the value chain.
Responding to the suggestion, Maruti Suzuki's Chairman RC Bhargava said the company's effort would be to provide features that are found in luxury cars in the company's affordable products.
“Today we have the new Ciaz, which has a lot of the features that you find in the premium sector cars and at a much lower cost,” he said.
“Please remember that India is a country where people are very very price sensitive (and) affordability is a factor,” Bhargava added.
He also said that selling expensive and small volume products did not fit into the company's strategy.
“Maruti's strength is bulk manufacturing in a large scale,” Bhargava said. “Small-volume sales, what some of the premium manufacturers do, just does not fit into our business model.”
He said, however, it doesn't mean that the company's customers would be deprived of the premium features.
“We will keep improving our cars and we will keep improving what value we give to our customer but this decision of what cars should we make, I request you to let the board decide,” Bhargava said.
In the April-June period of the ongoing financial year, Maruti Suzuki's market share in passenger vehicles market increased to 52.54 percent from 50.43 percent in the year-ago period.
The company sold more than 4.5 lakh units of passenger vehicles in the April-June period as against 3.67 lakh units in the year-ago period, a growth of 24.93 percent.
For the total industry, domestic passenger vehicle sales in the first quarter of the current fiscal rose 19.91 percent to 8.73 lakh units.
Addressing a concern over “stagnating margins” raised by another shareholder, Bhargava said operating margins were not entirely in the hands of the company as many extraneous factors such as foreign exchange rate commodity prices and global trade issues also played a role.
“Despite that, Maruti Suzuki's operating margins were higher than any other automobile company in India" and among the best in the world,” Bhargava said.
Earlier, addressing the shareholders, Bhargava said the potential trade war between the U.S. and China could lead to other countries also being drawn into this unfortunate course of events.
“Oil prices and the Iran problem create a great deal of uncertainty about energy costs this year. Both these events could lead to offsetting some of the benefits of the positive factors,” he added.
Shares of Maruti Suzuki rose as much as 1.5 percent, the most in nearly a month to Rs 9,256 in intra-day, before closing at Rs 9,235.
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