Business - Can't sell maruti-800 at a loss

Tata Motors might be about to challenge its status as the “king of small cars” on the globe with the launch of the Nano, but Shinzo Nakanishi, who took over as managing director of Maruti Suzuki last year, thinks he has an answer.

He discusses his strategy in India with Surajeet Das Gupta & Danny Goodman.

Tata’s Nano is opening up a new ultra-low-cost car market of Rs 1 lakh cars in the country. Will we see Maruti Suzuki in this space?

We will not be in the ultra-low-cost car segment. Our focus will be on the A1 and A2 segments, which are growth areas in which many of the new players like Nissan, Volkswagen or Toyota are planning to enter. Our entry-level car will remain the Maruti 800.

Why do you want to avoid this segment – after all, many small car buyers in the A1 or A2 segments might now choose to go for a Nano or an ultra-low-cost car?

Take the example of the Alto. Ten per cent of Alto sales come from the standard model, 30 per cent from the model with air-conditioning, and 60 per cent from the premium model, which, apart from the air-condition, also has power steering and is the most expensive.

With the Maruti 800, at one time 30 per cent of the sales came from air-conditioned models and the rest was from the non air-conditioned model.

Now it is the opposite — 70 per cent of the sales come from the air-conditioned car. Of the 60,000 units we sell every month, only about 4,000 are non-air-conditioned. The data clearly show that customers are moving up the value chain.

Many experts say you can reduce the price of the Maruti 800 anytime and take on the Nano, considering the plant is already fully depreciated. Is that a possibility?

Not at all. We cannot sell the car at a loss. We are offering it at the minimum price already.

Maruti 800 is a 25-year-old model. Do you think it might be the time to phase it out? After all sales are falling dramatically.

My engineers had told me earlier that the dies for body panels are enough to make 1 million cars. Then, we made some investments and they told me it is enough for 2 million cars.

However, we have already sold 2.73 million Maruti 800s. We will continue with the model as long as there is demand and we can manufacture it. Phasing out the model will depend on the market requirement. There will be a last day, but when, I do not know.

Of course, we also realised that consumer lifestyles have changed and that is why we have offered them a range of small cars, from the Alto to the Wagon R as well.