We can’t praise Maruti enough

With the 2 millionth car rolling off Maruti Suzuki’s production line in just one year, I thought it would be a good time to look back at what Maruti has done for the Indian auto industry and take a step back to see what they have Complete as brand and manufacturer.

It sounds funny to me to say that we don’t appreciate India’s largest photovoltaic manufacturer, but you, the car enthusiast, know exactly what I mean. While the average Indian votes with his wallet, the average car enthusiast doesn’t really appreciate Maruti cars. These cars earned jibes like “tin can” and “daba” but were not necessarily the sturdiest or most fun to drive, both of which were of major interest to car enthusiasts. I would know because there was a time when I was very much on the other side!

However, to truly appreciate what Maruti has created, we need to change our perspective and see how Maruti operates and who they serve. They’ve built a rock-solid business over the years and do a pretty solid job of changing with the market. Let’s look at some of the things that impressed me about them.

product

Maruti cars are designed from the ground up with efficiency and ease of use in mind.

Firstly, getting in and out is one of the easiest things to do in a Maruti car. This is especially true for cars designed and built primarily for the Indian market, such as the WagonR and Brezza. The door opens wide, is light, and is easy to operate. For this particular segment, the interior almost always has room to lead. These may sound basic, but Maruti gets it right almost every time.

Maruti cars are designed to be reliable machines that offer the best value for money to Indian consumers. Mileage was the key driver behind this and Maruti optimized the entire product around it, giving rise to the famous ‘kitna deti hai’ phrase. Even today, Maruti cars are among the most efficient cars in the segment. Part of this economy is due to the fact that all of their cars are very light.

Maruti cars are almost always on the lighter side compared to their rivals. Even today, the Baleno weighs about 1 ton and the i20 weighs about 1.2 tons. The 200kg difference alone is significant, as a Baleno with 3 people weighs roughly the same as an i20 with no one!

Even when it comes to technology, they choose which ones to pursue, but they remain vigilant. Maruti was one of the first companies to offer hybrid components in vehicles in the sub-10 lakh price range and has been slowly adopting powerful hybrid technology starting with the Grand Vitara. While they’re leading the way here, they’ve really spent a lot of time on electric vehicles or ADAS.

This slow and careful approach also means Maruti cars use tried and tested technology and they produce some of the most reliable cars on the market, giving even more peace of mind!

The sad thing about Maruti’s “lightweight at all costs” philosophy is how far behind their cars are in terms of safety.

The new Dzire clearly shows that they are capable of making a five-star car with good economy but most likely chose not to do so due to fuel economy reasons. I’m curious to know why Maruti hesitated for so long before doing this and it turned out to be a mistake regarding the bottom line.

What is worth mentioning here is how well Maruti has leveraged its joint venture with Suzuki. Models such as Baleno and Swift are IPs from Japan’s Suzuki, while Maruti mainly localizes them for the Indian market. Maruti actually just developed the Vitara Brezza from scratch and developed the Dzire using Swift’s platform.

Manufacturers like Ford have a lot of difficulty in this regard because they mainly serve developed countries like the United States and Europe, which means they don’t have many models that they can directly choose and localize and launch into the Indian market. Toyota has struggled with this as well, so they have adopted badge engineering with extended warranties in the lower segment of India.

supply chain

At the heart of the automotive game is the supply chain. It’s more local than what we see!

Cars are inherently heavy and so are their parts. This means that if you’re building a car in a certain location, most of the heavy-duty parts will need to come from around that area. Any further and shipping costs increase and the price of the final product goes up!

Therefore, setting up a factory requires not only setting up assembly lines, employees, equipment, etc., but also establishing a network of suppliers within a specific radius willing to supply suspension components, steel, plastics, etc.

The scale of the task is pretty crazy, which is probably why you see these factories clustered together in places like Pune, Chennai, etc. (Perhaps it is also easier to recruit talents)

Compare that to the smartphone industry, where you can ship chips from almost anywhere in the world and assemble them in India, and you begin to understand why India has so many smartphone competitors but little new competition in the automotive industry.

In terms of distribution, their dealer network is the highest in the country. We all know this, but I was really shocked when I saw a Maruti dealership on my climb from Bagdogra, West Bengal to Gangtok, Sikkim. It’s a small display that could probably show off a car, but nonetheless, it’s there. There are no dealerships of any brand within hundreds of kilometers!

Through such a network, Maruti is able to reach people that others cannot. So it’s no surprise that Maruti cars are selling very well, even if they aren’t the absolute best in the segment! This is why basic iPhones sell so well, even if they aren’t the best in their price range! They come into contact with people who know little to nothing about the market and what else they can get for the same price!

Over the years, Maruti has built one of the strongest networks of suppliers and distributors. Not only the dealers, but also the transportation of their cars to these dealers scattered across the country have also figured it out. Only on this scale can a virtuous cycle be formed.

When you know your car will sell millions of units, you have an inherent advantage at the raw material negotiating table. This again makes Maruti’s input costs cheaper and passes them on to buyers.

Strategy

For any brand, positioning is key. This is especially true for the automotive industry, which sells expensive depreciating assets. Car companies go to great lengths to shape their brand positioning to appeal more to their target demographic.

But what if the goals start to shift? This is exactly what the Indian car market has been witnessing over the past few years. Maruti’s appeal is slowly starting to take a hit as the proportion of younger buyers willing to spend more increases. In response, Maruti came up with NEXA.

In hindsight, the decision to establish a new distribution channel through NEXA and offer it its own cars has paid off incredibly well for Maruti. I liked this decision so much that I talked about it on MotorBeam 5 years ago!

The gist of it is that Maruti has decided against launching new brands like Hyundai and Kia and will only distribute their premium products and low-volume high-margin cars like Jimny and S-Cross through Nexa. This differentiates Maruti’s two main target customers and allows them to keep everything else about these cars exactly the same without the need for dealerships.

You have to give it to them to get it done. Honda has also made the same attempt in the Big Wing series showrooms, but compared to the expansion speed of Nexa, the progress does not seem to be smooth. I can’t imagine they have to give a guarantee to the existing Maruti Suzuki (now Arena) dealers that they won’t be robbed of good models because of the Nexa!

Nexa also provides a vacuum for Maruti to unleash their quirky side, including the Ignis and of course the S Cross, a knee-jerk reaction to the Duster, EcoSport. Having said that, even today, they make sure not to push the prices too high on their high-end products and ensure that almost all models, high-end or not, keep sales high.

I feel like they are still trying to break into the younger market, maybe a little too hard at times. (What is ciBrezza’s hot new technology It should even mean xD)

View from top

While we don’t necessarily need to agree with Maruti’s philosophy on cars, I’ve really grown to appreciate and respect their grind and the products they make in India.

Readers who trade in the Indian stock market know how reliable and respected Maruti Suzuki’s shares are. At the end of the day, they are a business, and a very well-run business. They know their customers, their network, and take a slow and careful approach every step of the way, ensuring they don’t fall into any cash traps that could affect their profits or showroom prices for their products.

They made good strategic decisions at key market crossroads and kept launching more and more cars! Even if they enter the EV market late, I’m pretty sure they will use what they know through their strong hybrid experience to produce reliable cars and will leverage their extensive supply chain to ship the product across India. This is what they’ve always done and I don’t see any reason why they would do anything different!

Now, dear Maruti, just make all your cars as safe as your new Dzire, then nearly 42% of Indians can drive safer!

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