Maruti Suzuki may revamp small car portfolio

Maruti Suzuki may consolidate its entry-level small car lineup in the next three to four years, as India’s largest carmaker reworks strategy for what was once its bread-and-butter business. According to two people aware of the plans, the company may also cap investments in the mid-size sedan segment, where it sells the Ciaz.

The company that built its business on small cars has made a big splash in the SUV segment in recent years, launching models such as Grand Vitara, the new Brezza and Fronx. Meanwhile, sales of small cars such as Alto, Celerio and S-Presso have declined.

Queries sent to Maruti Suzuki remained unanswered till press time.

Maruti will strengthen its presence in segments such as SUVs, EVs (electric vehicles) and hybrids as its doubles annual capacity to 4 million units by the end of the decade, the people cited above said on the condition of anonymity.

In 2023, Maruti Suzuki’s parent Suzuki Motor Corp. said it would bring in 10 new models for India between FY25 and FY31. Four of these will be battery EVs, a segment in which Maruti has no car at present.

Also Read: Maruti rejigs small car play amid SUV boom

At the same time, the people cited above said that Maruti Suzuki’s internal studies project hatchback volumes for the industry to stabilize close to 1.5 million units and account for a quarter of all passenger vehicle sales in 2030.

This would happen as affordability of the segment grows with rising incomes, and the impact of regulatory cost increases remains relatively limited. This also means that its portfolio of hatchbacks will likely require a different set of models to appeal to new buyers.

This is prompting a rethink on some models, which might likely be replaced with micro-SUV styled products to rival Tata Punch and Hyundai Exter, one of the persons cited above said. Some entry-hatch models could even be replaced with a new hatch brand to appeal to first-time buyers upgrading from two-wheelers, the person added.

“It is possible Maruti Suzuki will have a different vehicle to address upgraders in the market. Some models going forward may have to be relooked and replaced with fewer models, but those which can serve different types of consumers. The company will need many products to address all buyers, as the volumes in the hatch segment continue to be extremely high for Maruti Suzuki,” one of the people cited above said. “It is unlikely, though, that the Alto brand will be let go, given it has sold close to 20 million units globally.”

Declining, but still sizeable

In the overall market, sales of entry and mid-sized hatchbacks dropped substantially from 952,817 units in FY23 to 785,923 units in FY24, according to data from auto intelligence firm JATO Dynamics.

“The overall drop in sales from registration year 2023 to registration year 2024 can be attributed to significant declines in sales of several high-volume models, especially Maruti Suzuki's Alto 800 variant and the absence of sales from multiple models such as Hyundai Santro, Datsun Go and Redi GO, which previously contributed high volumes to the segment,” Ravi Bhatia, president, JATO Dynamics said.

Sales of entry hatchbacks like the Maruti Suzuki S-Presso, Renault Kwid and Hyundai's Grand i10 Nios have also declined significantly during this period.

“Even today, the volume of hatchbacks sold in the market is higher than that of entry SUVs. But we see that there is a high cross-consideration from buyers between premium hatchbacks and entry-SUVs—31% compared to only 8% cross-consideration in 2014,” an auto industry executive said on condition of not being named.

Also Read: Mini cars stall as some can't afford them, some want more

Significantly, the entire passenger car segment—sedans and hatchbacks—has been declining since it hit its peak sales at 2.2 million units in FY19. In FY24, the segments cumulatively clocked sale of 1.5 million units, according to auto industry body SIAM.

Maruti Suzuki earlier in June introduced Dream Edition variants for three of its hatchback models—Alto K10, S-Presso, and Celerio—priced at ₹4.99 lakh, a limited-edition series of these small entry-level models that will come with enhanced features.

“We’ve seen that in the premium hatchback segment, there’s good traction now. The contribution of the premium hatch segment [to overall hatches] is 43% in May. In June, we would like to focus on the small entry car segment. We’re launching a Dream Edition based on the feedback of our target customers. We’re focusing on utility and convenience of the customer,” Partho Banerjee, sales and marketing head, Maruti Suzuki India Limited said on a monthly sales call on 1 June.

The thinking on sedans

The company is also evaluating where it should best allocate its resources and manpower as it reorganizes its production. “It is unlikely the Ciaz segment will see any fresh investments from the company, as it now has to prioritize its resources for more high-volume products and segments which continue to operate at good economies of scale”, one of the two peple cited earlier said on condition of anonymity.

Sample this: Three-fourths of all sedans sold in India are in the entry-sedan segment, in which Maruti Suzuki sells its Dzire model and dominates the market.

Also Read: Maruti Suzuki plans an affordable hybrid rollout

Mid-sized sedans, such as the Honda City, Volkswagen Virtus, Skoda Slavia, Hyundai Verna and Maruti Suzuki Ciaz account for less than 2% of the entire passenger vehicle market at present. Sales of Ciaz, have been dropping each month, through most of 2023 and 2024. Sales have dropped to 730 cars in May 2024 compared to 992 in May 2023, though to be fair, Ciaz is a model Maruti has had for a decade.

Maruti Suzuki is now on a path to also offer six airbags as a standard feature across all its models, an exercise that could potentially be completed in another year. It has also sent three of its existing models for the voluntary Bharat New Car Assessment Program (B-NCAP) crash tests, results for which are likely to be announced by late June or in July. The carmaker also launched the new generation Swift, its premium sporty hatchback, last month with six airbags as standard across all variants.