PROJECT REPORT ON MARUTI 800

Submitted to: Submitted By:

Prof. P. Bharadwaj Hitesh Babbar 2010079

Jhanvi Thakkar 2010086

Kanupriya Kohli 2010090

Nirmal Modh 2010099

Kiran Karkera 2010093

Topic for the study:

Maruti 800 Model car of the MUL company.

Justification and Relevance:

Maruti 800 was a revolution of sorts in the 4-wheeler area in India. It was the first small car to be launched in India. The strategies used by MUL from time to time to maintain/increase the

sales of Maruti 800 were exemplary. It was the leader in market sales for nearly 20 years.

All these points make for a good case-study.

INTRODUCTION:

Company (MUL) Introduction:

MUL was a joint venture created in February 1981 between Japan’s Suzuki Motor Company and the Indian Government when the latter decided to produce small, economical cars for the masses. The intention from the beginning was to produce a ‘people’s car’. To get the project off the ground MUL took over the assets of the erstwhile Maruti Ltd., which was set up in 1971 and closed in 1978.

It was the fag-end of 1983, in the cold winter of North India, when one Harpal Singh of New Delhi was handed the keys to a small, never-seen-before-in-India, hatchback by the then Prime Minister, the late Indira Gandhi. What in any other circumstances would have been just an ordinary car launch turned out to be the start of the automobile revolution in India.

Product (Maruti 800) Background:

On December 14, 1983, MUL launched the first Maruti vehicle – the Maruti 800. The first model was the SS80, a 796cc hatchback car priced at Rs. 47,500. Subsequently, in spite of price hikes, the car remained within the reach of the Indian middle class and became a runaway success. Available in vibrant colours when India’s passenger car population comprised mainly Ambassadors and Fiats in black and white, M800 gave Indians the first taste of global quality and reliability.

In the 1980s, the Maruti 800 (M800) was India’s first ‘people’s car’. It caught the fancy of the middle class. Maruti Suzuki has never looked back since. In fact, in 2004, MUL will mark its 21st year of leadership in the Indian car market. The M800, first manufactured in 1983, has sold over 2.1 million units. Even though competition predicts that the ‘A’ segment is dying, the M800 continues to sell an average 12,000 units per month.

The Maruti 800 may be based on 1980s technology, but it remains very popular as an entry-level model in India. Its obituary has been written before, but the 800 has defied predictions of its demise. But changes to the regulatory environment in India could finally mean the end of the road for the 800.

The past: Limited choices better left aloneIndia's protected market meant that until the early eighties Indians had essentially three model choices in terms of automobiles: the Morris Oxford derived Hindustan Ambassador, the Fiat 1100 derived Premier Padmini and the Standard Herald derived Gazel. With all three products obsolete, quality construction more of an afterthought and attributes like power, safety and comfort being last on a manufacturer's to-do-list, the Indian automobile industry was going through what might be termed its anthracite period in history.

The company Maruti Udyog was conceived by the Indian government in 1981 as a means of providing affordable personal transportation to Indians. Named after Hanuman, the name of the God of Wind in Hindu mythology, Maruti was the brainchild of the late Sanjay Gandhi, son of the then Prime Minister Indira Gandhi. After toying with the idea of a joint venture with Volkswagen, Renault, Daihatsu and some other majors, Suzuki was short-listed because of the Japanese major's expertise in small cars.

The Maruti 800 based on the European Alto IV (SS80 in export markets) was launched in December 1983 in a four-door, two-box saloon (the tailgate opened only from the externally hinged rear window that was the access to the boot area) with a total length of 329.5cm. The car was powered by a 796cc, three-cylinder, SOHC, 6-valve, carburetted engine and had front-wheel drive. Power was 39 bhp, which though not much, still made for a respectable power-to-weight ratio because the car weighed slightly above 600kgs. The launch price was INR 47,500 making it the cheapest car at that time in India. The rivals tried to play it down on the power front, citing three cylinders to be insufficient for taking on a five-passenger load.

However, the Maruti 800 proved everyone wrong by a long margin. It was a time of licenses in India and manufacturers needed to get a license from the government on what to make and what numbers to make. This used to create a huge gap between demand and supply resulting in long waiting lists. Often waiting lists for cars would take up to three years to clear. A Maruti 800 booked in 1984-85 would be cleared only by 1987-88. The 800 soon notched up a huge waiting list as sales boomed.

The Maruti 800, in 1983, marked the introduction of the modern automobile into the Indian passenger car market. People were awed by Japanese reliability, ease of operation, refinement and fuel efficiency - attributes that the small Indian passenger car industry, in 1983, was unable to provide.

Maruti- Suzuki’s strength at the time of its entry in the Indian auto sector was its technological know-how and ability to produce quality products. They had expertise in engine building courtesy Suzuki .They knew what the Indian car buying populace desired and they delivered it in spades.

Weakness at the time could only have been its relative inexperience with the Indian audience. Maruti were entering muddy waters and they read the minds of the consumer so well that the company became India’s largest car manufacturing company with the largest number of models and iterations on the road and today with a commanding market share of close to 50%.

Opportunity that was quickly realized by Maruti was the existing demand for enhanced mobility among the Indian car buying audience. They wanted and deserved better products which Maruti had and was ready to sell to them. The growing purchasing power and disposable income of the Indian middle class was at an all time high which was perfectly tapped by Maruti with the all conquering 800.

Threat at the time could only have come by way of sanctions that the Indian government could have applied on Maruti or from a similar new entrant that could have also entered the Indian market like Suzuki. There was no major threat to its operations either from its existing competitors or perspective new players.

So all in all, things were favorable for Maruti on virtually all fronts.

STRENGTH

WEAKNESS

OPPORTUNITIES

THREAT

S W O T A N A L Y S I S

PEST ANALYSIS for Maruti Suzuki to enter India

POLITICAL FACTOR: The political environment favored Maruti to enter the Indian market with tie up with Suzuki at the time in 1983. The government was lifting sanctions and making it easier for foreign players to enter the market. In 1983, the government permitted Suzuki - for some time, the only FDI player - to enter the market in a joint venture with Maruti - a state operated enterprise at the time. Ten years later, as part of a broader move to liberalize its economy, India de-licensed passenger car manufacturing and opened it up further to foreign participation. The 800, being a Maruti model, enjoyed a number of benefits from the government. There were other sops too specifically for Maruti, which helped the company keep prices down for the 800. The Indian government is alleged to have curbed competition in order to promote state-owned Maruti. Consequently, several new car projects like Premier Automobiles planned tie-up with Nissan to manufacture the Sunny in the mid-80s did not receive government approval.

ECONOMICAL FACTOR: The economic conditions in India where favoring Maruti Suzuki because the people were willing to spend more on automobile sector. The Indian economy was doing better and after the last decade’s emergency rule under Indira Gandhi the eighties was a time of development and stabilization for the economy and people. The disposable income of the middle class was rising and they could now think of investing in things like better homes and cars so Maruti’s entry at the time was perfect.

SOCIAL FACTOR: Socially the Indian middle class was gaining in repute and spending power. The common man wanted to buy a family car that gave him mobility and didn’t cost a bomb and was easier to own and maintain. The population was rising and there was a serious shortage of options as far as car models in the nation was concerned we were not exactly spoilt for choice as far as cars was concerned.

TECHNOLOGICAL FACTOR: With the presence of only two players in the industry The Hindustan Motors “AMBASSADOR” and the Premier Padmini (PAL) “FIAT”, it is safe to say that technologically the cars being sold in the era were dated and old. Maruti entered India with Suzuki (Japan) and brought with itself latest technology that included

a) A modern compact efficient engine

b) Bucket seats

c) Floor mounted gear box

d) Better servicing options

e) Cheaper spares

So with a favorable PEST analysis Maruti Suzuki zoomed into the country and the hearts of millions of people.

PORTER’S 5 FORCE MODEL

BARGAINING POWER OF

CONSUMER: Negligible because of only 2 existing

players in the market

BARGAINING POWER OF

SUPPLIER: Very less because size of the unserved market was very large scale

THREAT FROM EXISTING PLAYERS:

Negligible as the 2 players were

selling 2 decade old products with

no new models planned

THREAT FROM NEW PLAYERS: Not at all because of the govt.'s J.V

rules for new players

THREAT FROM SUBSTITUTES:

No close substitutes at all

Segmentation, Targeting, Positioning of the Maruti 800:

The Maruti 800 was mass marketed since day one and with India being a largely price-driven market; the 800 became an entry point for first time car buyers. Price difference between Maruti 800 and its nearest rival used to be about INR 50,000-100,000, which was 25-50% of the 800's price.

The Maruti 800 was targeted at small families and the middle class. People who wanted to upgrade from a two wheeler to a 4 wheeler, the 800 had great aspirational value to millions of its first time buyers.

The Maruti 800 made an excellent entry-level car. It was good value for money and yet came with basic amenities like air conditioning, coil-sprung rear suspension and bucket seats in the front. Indian legislation has also ensured that there were three-point seat belts all around. So it was positioned as an entry level car for those who wanted to step up to the world of four wheeling.

Reasons for the success of the Maruti 800:

Within a few months of its launch, the Maruti 800 became the largest selling car in India, a title it has held for every month since then, till the month of May 2004, when its stable-mate Alto led it by a few hundred units.

Like all success stories, it is difficult to point out one single factor that has been responsible for the car's success, but several factors stand out, including:

The Maruti 800 is the cheapest car in the Indian market. With India being a largely price-driven market, the 800 has become an entry point for first time car buyers. Price difference between Maruti 800 and its nearest rival used to be about INR 50,000-100,000, which is 25-50% of the 800's price.The Maruti 800 makes an excellent entry-level car. It is good value for money and yet comes with basic amenities like air conditioning, coil-sprung rear suspension and bucket seats in the front. Indian legislation has also ensured that there are three-point seat belts all around. Over the last twenty years the 800 has established a reputation for being trustworthy and reliable.The Maruti 800 is simple and basic and yet sophisticated enough to meet the requirements of safety and comfort.

Maruti has the largest network of dealers in India, which means that the 800 has the widest reach.

Apart from these, the 800, being a Maruti model, enjoyed a number of benefits from the government. There were other sops (Standard Operating Procedure) too specifically for Maruti, which helped the company keep prices down for the 800. The Indian government is alleged to have curbed competition in order to promote state-owned Maruti. Consequently, several new car projects like Premier Automobiles planned tie-up with Nissan to manufacture the Sunny in the mid-80s did not receive government approval. Thus the Maruti 800 (actually up to the late 90s) did not have any real competition in the Indian market. A long period of more than 15 years without any real competition ensured that the 800's volumes stayed high, enough to amortise costs of the plants and dies used for manufacturing. This has ensured that the Maruti 800 has managed to retain its low pricing in a market where the nearest competitor, till a few months back, was priced about 50% higher.

The 800's effect on India:

It would be wrong to credit the 800 with merely the physical growth of the Indian market in its early days. The car has been for the Indian market what the 2CV and the Beetle have been for their respective markets. The 800 has been the car that has put India on wheels. Thanks to the model being launched in 1983, the Indian automotive benchmark was raised a few notches in terms of performance and quality. From an object of purely aspirational value, the 800 has transformed the passenger car in India to a perception more along the lines of a basic necessity. In doing so the 800 has provided a platform for all the models higher than it in the market. It has helped the market to mature to a level in which there is a place for many product segments and, at the top-end, models like the Porsche Cayenne or the latest S-Class.

The 800 has encouraged low pricing in the Indian marketplace. Thanks to the low price benchmark set by the 800, competitors are inclined to price their products lower to come close to the 800. This has resulted in a market where the B-segment hatchbacks start retailing at little above INR 250,000 and a sub-compact like the Tata Indigo and the Ford Ikon (three-box Fiesta saloon based on last generation European model) at little above INR 400,000. This has made a number of cars more accessible to the Indian customer.

The employment generated (both primary and secondary) was huge as Maruti resulted in the growth of a number of ancillary units. Thanks to the large volumes produced of the 800, the ancillary industry that started with Maruti in the Delhi-National Capital Region has benefited the most. Companies like Sona Steering (now Sona Koyo), Subros and Jai Bharat Maruti are amongst the most successful suppliers in India.

On the other hand the contribution of the 800 in the socio-economic development of the satellite townships of Delhi cannot be denied. The initial phases of the growth of Gurgaon (a significant satellite township of Delhi) was fuelled by the local Maruti manufacturing unit. The infrastructure development kicked-off by Maruti (and its mainstay, the 800) in the early 80s laid the foundation for Gurgaon to develop into the modern IT-BPO hub that it is today.

Maruti 800 in the BCG Matrix as of 2004:

STAR

Swift, Wagon R, Swift Dzire

????

Ritz, A star,SX4,EECO,Estilo,Grand Vitara

Gypsy

CASH COW

800,Alto.

DOG

Omni

Even according to the latest (year 2004) BCG matrix the famed Maruti 800 is a cash cow business for Maruti, yes the sales have slumped to around 2500 monthly. But there are still hard core fans that swear by the 800 name and would just not put their trust in any other car. That’s the precise reason why MUL would not discontinue the 800 just yet. Yes because of the latest Bharat Stage 4 emission norms it has been proposed that the 800 be phased out but that phase out would not be immediate it would be carried out slowly and timely as its been started with Maruti not selling/producing the 800 in 13 of India’s top cities, the phase out would follow a similar path into tier1 and tier 2 cities.

If we take a look back at Maruti’s flagship models performance a decade and half ago it was the shining star of Maruti. When the car was launched in 1983 within two years the car lapped up numbers like no other and emerged as a star for the company. For more than a decade since 1987 till 1998 it was the star of the Maruti stable and thereafter it assumed the role of a cash cow which it holds to this day. It’s safe to say that India’s answer to VW Beetle and the Citroen 2cv will not die just yet.

On the advertising and promotional front the 800 has always been projected as a compact entry level family car. The campaigns have always shown a sensitive, family centric theme that always found favor with the sentimental Indian audience. Since they were high involvement purchases involving a great degree of thought, time and effort Maruti always scored big by making their ads high on the emotion quotient as well. Maruti always touched the emotional cord with their adds weather it was the “India comes home in a Maruti” campaign or “ joy of life “ campaign their adds were always that much closer to the hearts of the audience. There portrayal of the 800 as a member of the family only goes to reinforce their family and values orientation. Fuel efficiency was another trump card on their side that Maruti always played to perfection. The campaign “Petrol Khatam Hi Nahi hunda” highlighted the super mileage of the car and incorporated the warmth of the family as well. Their creative’s also targeted the youth quite effectively as it was presented as young peppy car when actually it was aging, their target audience was always most certainly the young family man or a young man who is about to start one.

On the PLC front though sadly it is coming to an end it’s in the decline phase of its life with it having already created a market share and that too is being eaten away. Maruti’s plans of taking it out in 2-3 years would mean the end of the road for a motoring true icon.

Maruti 800’s Competition and Strategy: 2000 onwards

Maruti 800, the name most common for a middle class Indians and the only car in the A-Segment category. It served as cash cow of MUL for nearly 17 years. It can still milk better and MUL is trying its level best to capture the market. The basic strategic focus of MUL is to offer Zen,Alto LX and its variants to all the existing customers and on the other hand position Maruti 800 to those who want to switch from twowheeler to four-wheelers segment.The obvious idea is to keep Maruti 800 out of the competition and make it nearest alternative for two wheeler segment. According to Ansoff matrix it will be called as new market / old product move. It is quite clear from the strategic point of view that Alto never influence Maruti 800 or its variants for cannibalization. Though there was hardly any difference of more than Rs.35000 between the two entry level and small car segment. Placing all facts and moves of MUL since 2000 will give a broader picture of the game plan and strategic sequence.

Tracing back to start of year 2000, MUL market share had fallen to 51 percent from 80 percent that it had enjoyed for nearly seventeen years. Though the market share had fallen altogether, the sales of Maruti 800 had grown by 22 per cent, that of Omni by 48 per cent and that of the Zen by 22 per cent. The MUL’s logic for increase in unit sale with the decrease in over-all market share is that when there are more players in the market there will be competition. When there is competition, the market expands and the consumer base increases which means there will be more number of unit sales. March 2000, MUL came out of the mess with sales of 44,167 units. The sales included 3,980 units for export. These sales included 12,348 units in the 'B' segment and 7,510 units of Zen and 4,838 units of Wagon R. The market equation balanced the loss on Hyundai’s Santro and Daewoo’s Matiz part. Some market share was eaten up by Telco’s Indica as well. The Hyundai’s loss of market share was not because of lack in marketing strategy but the production problem. Hyundai’s Santro and Accent was produced on the same assembly line and Hyundai was trapped in catch-22 to maintain a restriction on trade off between the production of Santro and Accent. MUL’s strategy to offer credit sale to its dealers also fueled the fire. At the same time Alto was strategically placed with two variants LX and VX. Alto LX was placed between Maruti 800 and Zen at price Rs. 299,000 (mind the psychological pricing) while Alto LX was placed between Wagon R and Esteem at price Rs. 365000. Later on the VX version was backed out from the market as customers were hardly able to differentiate between two models. The difference was of LX and VX but one cost 66,000 more then another. So what is the lesson from this mistake - Never position two brand extensions with high price difference and to wrong customers! January 2003, MUL hiked the price of its all 800 cc variants, Omni and Esteem. Competitors were emotionless on this move of MUL.

Just six months after that Tata Engineering gestured for price hike due to higher input cost. MUL going against the situation slashed the price of its entry level car-Maruti 800. OOPS!! How it is possible when the cost of raw material is increasing and out of 12 Manufacturer one (MUL) has slashed the price and for what did they hike the price for just six months. This key insight was in the long term profit at the expense of short term decrease in sales. The three Brands, Maruti 800, Omni and Esteem covered 55 percent sales of MUL portfolio and MUL covered 60 percent market share of the total four wheeler segments. The whole game plan was to cash this opportunity of increase in raw material cost. If you remember, the increase in price in Jan-2002 was nearly Rs. 8000 for 800 cc variants and Rs. 4000 for Omni and Esteem. Now after six month the price reduction was only for Maruti 800 and in the range of Rs.15000 for 800 cc variants. Logically, there was no loss but profit by this price decrease. The only thing they did was that they took money Rs. 8000 from one consumer (price hike) in the month of January and gave it to a customer who bought in the month of July (as a decreased price) and the increase in sales with this game plan bought all the profit. The only question arises is that how did it happen? The answer comes from psychological effect on customer with the increase in the steel cost. But some still think that the price reduction was due to decrease in sales and on the other hand MUL told its due to cost rationalization and improvement in production efficiency. MUL was thinking hard to curb the market in the A and B segment. The main competition for these segments was coming from second hand cars market as substitute. This market being unorganized and large was on the radar of MUL. The MUL shaped it as organized sector with the brand name True Value. All dealers in this market were selling the second hand car with 85 percent price of the new car. All the damaged parts were replaced with the new Maruti branded parts. Only vehicles which are less than seven years old were procured under the True Value scheme in accordance with the norms of MUL. All the vehicles done lesser then 60,000 km were on one–year warrantee. The highly sold brands were Maruti 800, Zen and Santro. The motive of Maruti behind this ball game was to maintain market share of its brands and to regulate the market from either end. The Zen was in the top list of true value brands. To make some visible differentiation between a newly bought Zen and the one bought under True Value brand, MUL relaunched Zen with new look and without a price change. How Smart!!!

The luck charmed on the royal part too which was exempted by Suzuki for Alto, Maruti 800, Omni, Gypsy, Esteem and Zen Suzuki, for the period April 2003 to March 2005. A 10 per cent discount on knocked down components imported by Maruti came as additional relax to MUL. To make it an opportunity MUL reduced Rs. 50000 on Alto. Competitively, MUL was on a strong position. The portfolio of MUL had at least five models in the A and B segments, while on the other side Hyundai with Santro, Tata Engineering with Indica and Fiat Auto with Palio were competing with only one product in B segment. The competitors were not ready to reduce the prices and were shrinking their market with more expensive variants like Hyundai Getz.

The indication is that MUL is only company to penetrate in the market with low priced vehicles. This makes the MUL also busy in price adjustments. The upcoming problem was of Maruti 800 and its variants. Sales of Maruti 800 were eroding continuously since 2000. To make strategic fit of Maruti 800, MUL stepped out in year 2003 to tie-up with the State Bank of India for financing, the main objective was to use wider rural market network of SBI for tapping the prospects. To take the competition by Hyundai's Santro and Tata Motors' Indica seriously for B-segment cars, Maruti Udyog Ltd, India's largest carmaker, unveiled a new-look Zen, without change in price. In mid of 2004, more national and international bank started integrating in the win-win strategy of MUL. HDFC Bank has launched a new product for financing Maruti 800. The bank promised to offer 85 percent finance for on road Maruti 800 (with registration and insurance) for tenure of seven years. The objective was to match EMI of the two-wheeler with Maruti 800. Apart from easy loans from banks, MUL launched a new market offer called `2-se-4' in Ahmedabad and Hyderabad under which a consumer can exchange his two-wheeler for a Maruti 800. In the same year, Alto performance made it to overtake the company’s bread-and-butter car Maruti 800 to become the largest selling car. In July 2004, Alto sales were 14 percent higher then Maruti 800.

To cope up with the increasing cost, MUL increased the price of all models indirectly by launching new variants of Zen. The price of Maruti 800 was kept constant to suit it for the targeted customers who were two-wheelers owners. The next thing MUL did was to increase the procurement of steel from domestic market by 15%. This was to get competitive advantage of low cost steel as compared to imported steel. MUL also relaxed the norms of schemes for True Value cars to increase the market share. It was a different kind of proliferation where a customer can choose a second hand Maruti 800 or Zen or a new variant of Zen and Wagon R as per the value fathomed by customers. With eye on entry car market, Tata threaten with a car priced on Rs. 100,000 which is still on papers. The threat was caught by MUL and proactively advertised launch of its LPG variants of Maruti 800 and Alto. The idea was to reduce the maintenance and fueling cost. WOW!! Handle threat with a counter threat.

The over-all sales MUL grown by 20 percent in the financial year 2007 Despite decrease in sales of Maruti 800 by 11 percent, Baleno and Esteem sales by 7 percent Alto, Zen and Wagon R shares the highest share of sales in the product portfolio of MUL and maintained the over all sales increase by 20 percent. In A3 segment, with the presence and focus of car-makers such as Hyundai, Ford, GM, Honda and new entrants like Mahindra-Renault combine is making existing and competition intense. Maruti the major player of the small car segment market has only 15 percent share in the A3 segment. The true indication of Head-on can be guessed by the launch of new models by major players who also expanding their presence in the segment. MUL launched sedan SX4 and priced just at par with Honda City. This launch was the replacement of

Baleno and to strengthen the A3 segment. The only restriction will come with production unit at Manesar which produces the Swift and SX4.The installation capacity of this unit is 100,000 units. Nearly 7000 units of Swift already produced from this plant per month. This left little score for the production of SX4. The momentum in the economy and increase in the disposable income of the consumers increased the market demand by 22 percent. So the scope in the market is higher. The MUL reshuffled its portfolio launched five new models starting with Swift Petrol in May 2005. In 2006-07, the company phased out theZen and replaced it with a brand new car the Estilo and gave Wagon R a face lift.Apart from internal problems, the external factors are turning unfavourable to customers. It is fact that 75 percent of the customers buy the cars on loans. The increasing interest rates have begun to affecting the sales. On the other hand increasing cost of steel procurement has affected the operation margin which is flat on 13.36 percent. In the FY06, the sales were driven by lower exercise duties. The strategic focus is on three dimensions; new engine design, fuel efficiency and diesel engines. Till now the diesel engine is the domain of Tata. The launch of LPG models has witnessed the strategy of MUL. Swift diesel was initial step for the whole journey.To beat the competition, loans for Maruti's cars are being priced at the lowest rates in the industry - 8.59 per cent per annum, which is about 40 basis points lower than that offered by arch rival Hyundai Motor, makers of the popular model Santro. MUL has the capacity of producing 2500 units per month due to restriction on production capacity. The car maker's inability to replace its fading models Gypsy, Versa and Omni is also going against the company. In June 2007, MUL has offered discounts ranging from Rs 5,000 to 35,000 across various models. The discount is on Maruti 800, Omni, Alto, Esteem, Versa and on the petrol models of Wagon R, Swift. No discounts have been given on Swift diesel and SX4. The domestic sales were zoomed by 25.5 percent. C segment, that comprises Omni and Versa, MUL sales up by 24 percent. The company sold 37,646 units in the A2 segment comprising hatchbacks Alto, Wagon-R, Zen and Swift as against 27,228 units in the same month last year, up 38.3 per cent.Sales of sedans Esteem and newly-launched SX4 increased 46.4 per cent in the month at 3,923 units. Sales in the A1 segment, comprising MUL's flagship Maruti-800, dipped 20.3 per cent at 6,214 units.

 

Maruti 800 (Domestic Sales Volume in Units) Fiscal Years1983-84 8521984-85 202691987-88 637631994-95 1061141995-96 1394031996-97 1835931997-98 1845841998-99 1619751999-00 1890612000-01 1519762001-02 1443872002-03 1433222003-04 167561

Time Line:

Prices over the past five years haven't moved muchFebruary 2000 2,32,444

June 2000

2,15,401(price cut to offset sales tax hike)

January 2001 2,21,144

March 20012,08,903 (excise cut)

May 2002 2,24,201

July 20022,06,419(price cut)

March 20032,00,969(excise cut)

April 2004 2,04,827

Maruti launched the first 800 (Alto IV generation), the SS80, in the Indian market in December 1983. The car was known just as the Maruti 800 and was essentially a four-door saloon with a rear window that opened for access to the boot area. The model received a heavy facelift in 1986 with the introduction of the SB 308 body style. This new shape made the 800 into a five-door hatchback though the mechanicals remained the same including the 796cc, three-cylinder engine and the leaf-spring rear suspension. This body style continued unaltered, barring a few changes to the grille, for the next 11 years till 1997. The present Maruti 800 shape was launched in 1997. Maruti replaced the carburetion system in the 796cc engine in early 2000 with an MPFI unit to meet the Euro II emission norms. Power went up from 39bhp to 46bhp though there were no other major changes. Platform remained the same though the rear leaf spring suspension was changed to coil springs for the deluxe model. The company also offered a five-speed gearbox in the deluxe model. The 800 in this form has continued till date though the company has now withdrawn the five-speed gearbox from the range in order to push the new Alto.

December 1983: Launch. SS80, four door saloon with a rear window that opened like a hatch.

1986: Major facelift: SB 308, the tailgate opens completely and the car is now a five-door hatchback

1997: First major facelift in eleven years. New headlight, taillight, dashboard, indicators etc

2000: Upgraded engine MPFI. 46bhp. Also five-speed gearbox, coil-spring rear suspension and radial tyres.

2003: Five speed version withdrawn.

The 800: Future Imperfect?

The Indian passenger car market is witnessing a sea change with the B- and C-segments being the fastest growing. The A-segment, where the Maruti 800 is the only player is not growing and 800 sales have been stagnating in recent months. In fact, May sales went down on a year-on-year basis, which Maruti attributed to uncharacteristically higher sales in May 2003. But more than the stagnation (or decrease) in sales, it is the rise in sales of the Alto that has affected the 800.

Some time back, Maruti had reduced the prices of the Alto with the base version now selling at around INR 230,000 (non AC), only slightly higher than the AC version of the 800 (INR 226,000). Even the AC version of the Alto at INR 260,000 is not very far off the 800. The Alto is powered by the same 796cc engine, has more modern mechanicals and is bigger. It is also regarded as a more expensive car in the typical Indian social strata. Thus the pricing of the Alto has made it a substitute for the 800, the worst affected being the 800's wedding gift market. People who used to gift Maruti 800s are now gifting the Alto as for only a few thousand more they command more respect. Alto sales started creeping up once Maruti launched the non-AC version and the gap between the 800 and Alto narrowed and the bigger car finally overtook the traditional best seller in May 2004. In May, the score read: Maruti 800 - 10,016; Alto - 10,373 units.

It seems likely that the Alto will continue to lead in the Indian market. Maruti executives point out that April-July is not a good period for the 800 sales as the 800's main customer - the salaried middle-class in India - are under financial pressure (because of income tax in Feb-March and expenses during the start of the financial year like school/college admission fees) during these months and also because of a tendency to defer purchase decisions till after monsoon.

In reaction to falling sales, the Indian media has been quick to speculate the eventual demise of the Maruti 800, a speculation that Maruti executives are quick to dismiss and they have a point too as a 10,000 unit per month model (and currently India's second largest selling car) cannot be retired so easily. They point out that the company's strategy is to bring down the Alto to A-segment prices so that Maruti can offer two models in the same price band. "Two models will only help grow the A-segment like our three models have grown the B-segment," pointed out an executive.

The then Managing Director of Maruti Udyog added, "The point that Maruti 800 would make way for a lower priced Alto, assumes that price is the only

factor for entry-level buyers. That is not true. For many thousand aspirants, Maruti 800 is the only brand they will settle for, because it is the one they trust."

And trust is something that the 800 has in abundance as a brand that has crossed 20 years of existence and sold in excess of two million units to date. To support the 800, Maruti is now targeting the 40-million two-wheeler owners in India. With financial institutions ready to offer loans up to eight years, the Maruti 800 base model is now available at a down payment of INR 21,000 and an EMI of INR 2,500, something that brings it closer to two-wheeler prices, a fact that Maruti is strongly publicising with millions spent on a new ad campaign to highlight the affordability of the 800. A fresh facelift cannot be ruled out.

Yet, the bias towards the Alto cannot be missed as the company realises that they have an eventual replacement of the 800 now. The intention is to depreciate the Alto faster so that prices can be further brought down. Maruti is also working hard to further reduce component costs of the Alto so that prices can be further rationalised. Other steps, like stopping the 800 five-speed version and delaying a long overdue facelift for the 800, have pushed customers towards the Alto.

What may eventually bring the end to the 800 story - point out some analysts - is future legislation. New safety legislation and the impending upgrade to Euro III may make Maruti think very hard about whether or not to invest in the 800. But that is still three years away and this is a long time period in India's automotive industry.

Fate of Maruti-800:

In early Feb-2009 Maruti-Suzuki Limited announced to scale down the production of the popular brand Maruti-800. They cited inability to upgrade the Maruti-800 engine to comply with engine efficiency and pollution standards as reason for the same. At that time Euro IV norms were recently adopted in 11 major cities of India. The cities were Delhi, Mumbai, Kolkata, Chennai, Bangalore, Hyderabad, Pune, Kanpur, Ahmedabad, Surat and Agra. Later in the same year the Maruti-800 was phased out from production schedules completely due to ever diminishing contribution to the sales revenue.

EXHIBIT-1 Market Segment of India Car Industry -2010

Learning/s from the study:

STP of the company was spot on considering the country they were in. Varying Marketing strategies to maintain/increase the sales of the

product. Managing cannibalization from its own product. Exiting the market at the right time.

References:

Philp Kotler Prof. Bharadwaj’s Slides Wikipedia Google www.managementfunda.com www.articlesbase.com www.icmrindia.org www.slideshare.net www.internsindia.com