Rural markets will start looking up in 3-4 months: RS Kalsi, Maruti Suzuki India
"With a good monsoon, the sentiment has improved and in the next 3-4 months, the rural market will look up," said RS Kalsi.
There is major volatility in currency, the yen is appreciating. This will have an impact on your profitability. How are you dealing with it?
We have a big dependence on the yen and it affects our profitability. Recently, we increased prices of some of our models. A little bit of change we do absorb, but we have to pass on any major fluctuation to customers. The other step we take is cost reduction at the plant through various innovations. Aggressive localisation and cost reduction (rather than price reduction) with suppliers partners really helps.
The rural market has been a strength for Maruti. What prospects do you see now that the monsoon has been good?
Five-six years ago, we had only 2 per cent penetration in the rural markets. Today, we have about 30-32 per cent. We have been able to create this market because earlier we did not have a network in these places. Today, we have over 800 rural outlets, so we have gone closer to the customer.
We were having a good 18-19 per cent growth in the rural market till last year, but after two bad monsoons, the sentiment had gone down as even people who weren’t dependent on the monsoon were deferring purchase decisions. Now, with a good monsoon, the sentiment has improved and in the next 3-4 months, the rural market will look up. The 30 per cent contribution to sales will continue, and we are expanding it further.
What is your outlook for passenger vehicle sales in the festive season?
It is difficult to put a guidance in terms of numbers and percentage, but the growth will be certainly in double-digits compared with the previous year. Certainly, there is optimism in the backdrop of monsoon and we are looking at it with a lot of excitement. Once GST is in place, there will be a different kind of market altogether. In the long term, we are looking at two million cars by 2020.
Do you feel threatened with products like Renault’s Kwid?
I would not like to comment on the competition but we are continuously upgrading our products even without any pressure from the competition. There are challenges that will always be there, but we continuously innovate and anticipate what customers want. We are more driven by customers than competition.
What changes are you seeing in your customer profile?
I think our market is evolving in a big way. If we look at the income pyramid, there will always be a market for entry-level vehicles because car penetration in our country is very low and the market is highly under-served. Currently, 47 per cent of our customers are first-time buyers and it has increased by about 7 per cent in the last two years. The customers at the entry-level are looking for features in addition to price, so the vehicles have to be more feature loaded in line with the latest technology — whether it is infotainment or styling, and we are trying to focus on that.
While there will be customers for the entry-level, the ticket size is moving up. First-time buyers are sometimes skipping a segment or two and heading for higher segments. The reason is that youngsters today are getting good salaries, and there are dual income families where both spouses are earning. So, instead of buying a hatchback, they are going for a sedan. Easy availability of finance is also adding to it as the impact on EMI is not substantial. In terms of choice of models, a good percentage of them are going directly to premium hatchbacks or entry-level sedans.
Has Nexa helped you acquire customers not traditionally with Maruti?
Recently, we completed one year of our Nexa operations and we discovered that about 51 per cent of the total one lakh customers were those who never had bought Maruti. This is a big achievement.
What other measures are you taking to emerge as a premium carmaker?
We are now moving towards premium and luxury products and we have already established it if you look at the A3 segment in which Ciaz is already in the leadership position. We are focusing on products, experience, design, technology and styling.
By 2020, we expect 15 per cent of sales to come from Nexa, up from 10 per cent now. We are launching two more products, Ignis and Baleno RS, by the end of this year. So, the premium products would not only be coming to Nexa channel, but our main channel will also see a change in the product line-up at the premium end. So the overall premium share will be much more than that of Nexa.