Car wars

Car wars

Reports that Maruti Udyog Limited is steadily losing ground to other car makers are not surprising. Although the giant joint sector company is far ahead of its competitors in the number of cars sold, its market share has fallen by a whopping 16 per cent. Already Hyundai's Santro has overtaken Maruti's Zen and if the popularity of the Korean company's newly-introduced Accent is anything to go by, it will not be long before it overtakes Maruti's Esteem. All this tells a tale of its own. Maruti's present problems are of its own making. Two decades ago when Maruti came on the scene, it heralded new technology and a challenge to Hindustan Motors's Ambassador and Premier Automobiles' "Fiat".

Middle-class Indians found in the new car something to lap up. Unfortunately, MUL soon became a victim of the monopolistic conditions in which it operated. In the seller's market that Maruti was so used to, it had forgotten all about competition until the Korean giants Hyundai and Daewoo and Italian Fiat arrived on the scenewith better technology and some proven models. The buyers realised that the ubiquitous Maruti had not undergone any upgradation since its introduction.

The huge cut in the prices of its popular models helped MUL to retain its market share for sometime. The buyers also realised how much easy profit MUL had been earning. For once, they had a choice in Hyundai's Santro and Daewoo's Matiz which packed better technology, more comfort and driving pleasure in their sleeker models. Small wonder that the profit-raker Zen lost out to Santro and Matiz. Even now, MUL's leadership is unchallenged because at the lower end of the car market, Maruti 800 does not face any competition. In fact, the only competition it faces is from MUL's own Omni.

It was by selling 2.71 lakh units in this category in 1999 that MUL was able to retain its commanding position. The situation is unlikely to change in the near future because none of MUL's competitors is in a position to offer as cheap a car as Maruti 800. This is all the morereason that Maruti should think in terms of giving the common man's car the much-needed technological upgradation but, far from that, it has been offering newer models like Baleno and Wagon R in a bid to be the market leader in all the segments of the car market. Since Suzuki enjoys a pride of place in the global small car market, it is within its reach to give Maruti 800 a facelift, although even two decades after Maruti's indigenisation process began, Suzuki has not been able to share with MUL its gear technology.

The car sales are poised to grow at 12 per cent this year but the market is so small that profits will remain a chimera for most companies. Even Telco, which pushed itself to the third position thanks to Indica, will take years to earn a profit. In the large-size segment where the competition is the fiercest, survival will, by and large, depend on the manufacturers'ability to find markets outside the country. How small the market is can be gauged from the fact that Mercedes could sell only 462units last year. Whatever monopoly it enjoys in this slot will be threatened by the luxury model Telco is launching next year. With newer and newer models, it's truly a buyer's market. It is time to savour the first fruit of liberalisation.