The setting was straight out of a pirate movie. We were on the deck of a Spanish-style sailboat that was parting the unnaturally calm waters in a lake equidistant from Mumbai and Pune.
With a cigar's glow lighting up his face, Maruti Udyog managing director Jagdish Khattar said, "We are not going to extinguish the competition."
Another calculated puff later, the managing director of Maruti Udyog Ltd added, "Instead, the competition is going to make us look good."
We were talking diesel cars here and the occasion was an evening function to celebrate a well-planned test drive for the motoring journalist fraternity.
MUL is not used to providing extravagant test drives for auto scribes. Actually, it started doing this only two years ago with the Suzuki Swift.
On that occasion, and for subsequent launches, the manufacturer called journalists to a small resort near its Gurgaon plant and let them loose in an industrial area for a couple of hours.
Close to 100,000 Swifts later, MUL bigwigs travelled to Mumbai with a full army of R&D whizkids to unleash, arguably, the most important car for year 2007 -- the Swift Diesel. And the fact that the test drive route almost nudged Tata Motors, stationed at Pimpri hardly 50 km from where we were, said a lot in hushed tones.
The Swift Diesel has all the advantages of the runaway success that the Swift petrol is, and then adds a cardinal quality that is critical for most Indian car buyers -- the economy of a diesel motor. But is MUL equipped to sell a diesel car?
Talking diesel
First off is effective communication: MUL will be dealing with a lot of buyers (generic diesel buyers) who would have never even walked in to one of its showrooms.
Its Swift Diesel strategy involves a high-decibel ad campaign that talks to affluent youth with one-liners such as "This diesel rocks" and a purple colour theme that will differentiate the car from other small cars from the MUL line-up.
It's not easy managing six cars in the small car market -- MUL already has the Maruti 800 and Omni, Alto (the largest selling car in India), the tall boy Wagon R and the Zen Estilo apart from, of course, the all-conquering Swift in its line-up -with price tags ranging from Rs 200,000 to close to Rs 600,000.
"We have learnt to play the segment very well. It is important to have models for every town, every city and every kind of buyer who walks into our showroom," says Khattar. "That strategy helped us dominate the A and
B segments," adds Mayank Pareek, general manager, marketing, MUL.
Who is the buyer?
Has Maruti identified the diesel buyer? "Our suburbs are witnessing growth never seen before and increasingly, people are travelling 30-40 km one way to work. For them the only diesel car option available was not good enough. Our research proved that there is a certain class of buyer who would prefer an economical petrol car to the existing diesel option (Tata Indica, Tata Indigo) and given a chance to own a contemporary car without the stigma of a conventional diesel, they would queue up for it," says Khattar.
How about pricing -- the economy conscious buyer will demand a cheap entry tag too, right? The think tank of MUL does not think so, as they cite the example of a diesel variant of a premium C-segment entrant accounting for the lion's share of sales in recent times (the reference is to the Ford Fiesta TDCi, which manages close to 75-80 per cent of
Fiesta numbers for Ford).
"Indian car buyers now tend to appreciate the right techonology with new age design trends," says a senior marketing manger associated with the Swift Diesel launch. Khattar gets specific here.
"Those who stay in Noida and Gurgaon and travel to New Delhi everyday for work, and Thane and Borivli residents who struggle through traffic to reach Worli and Churchgate will appreciate the new car. They are young and do not like the idea of a chauffeur-driven car."
It has got the right car (the Swift diesel can return 21 kpl on highways and 14-15 kpl on normal city driving conditions, according to Maruti), the right communication strategy and has even identified its prospective customer base.
But how about instilling the 'diesel' mindset within the company and its 337 dealerships and 1,545 service stations? They are certainly not used to cars driven by the sticky fuel, heavy engines with complex innards that include an intercooler and turbo-charger. And yes, no spark plugs!
It is a serious issue and MUL has tried to address it from the beginning.
According to the R&D team of MUL, it has already trained the service stations to handle diesel technology.
Fuel advantage?
Won't the Swift Diesel and the future diesel models affect petrol car sales of MUL? It should, going by the example of Tata Motors and more recently Ford -- both players are struggling to move petrol cars from their forecourts.
"It depends on how MUL handles the communication and manages its inventory," says a prominent dealer from a Mumbai suburb who has seen and driven the new car.
"There will be some struggle initially. I hope MUL will have enough cars to face the demand," he adds. Clearly, the supply issues following the launch of the Swift and the LPG/petrol-powered Wagon R Duo (a month's waiting list) is fresh in his mind.
Engine of growth
The Fiat-derived JTD diesel engine won the "International engine of the year" award only last year and
is successfully powering many a new Fiats in Europe today. To understand this engine better we should start from how Suzuki landed the rights to this engine to begin with.
The optimism of the new millennium saw General Motors and Fiat forge an alliance. A double burger followed by tiramisu may sound good, but when it comes to car making, the Americans and Italians were two extremes.
But in the duration that they held hands, GM and Fiat worked on a few common platforms and invested quite a lot into an engine -- the 1.3 JTD, a common-rail injection diesel. GM owns close to 20 per cent of Suzuki and the Japanese small car specialist woke up and smelt diesel.
The giant from Hamamatsu never believed in diesel power (the 'whirlpool' diesel sourced for its lumbering Vitara SUV in 1995 being an exception), since it always managed to get extreme fuel efficiency from its featherweight small cars that populated Japan, Europe and, of course, India.
The increasing popularity of diesels in Europe and countries like India had forced it to think diesel; and trust the grand old man Osamu Suzuki to ensure that Suzuki got the license rights to build the GM-Fiat diesel. The GM-Fiat deal subsequently fell through, but Suzuki has had its prize catch since then - the 1.3 JTD engine.
Past experience
In India, Suzuki never had to resort to diesels since it was selling almost everything it could produce.
"In 1998, MUL got serious with product planning for the country and diesels were ruled out since the artificial pricing that subsidised diesel was supposed to end," says Khattar.
"We waited from 1998 onwards for the policy change, only to realise that the pricing difference was here to stay, and more importantly, diesel technology was closing in on petrol -- you could have similar power and performance benefits along with sterling economy and that is when we decided to take the plunge," he adds.
"We could no longer stay away from diesels." The delay meant that for eight years, Tata Motors dominated the 125,000 a year passenger car diesel segment in India with cars made out of the Indica platform.
In 2004, the decision at MUL to commission a dedicated diesel engine plant was taken, with an investment of Rs 1,800 crore (Rs 18 billion).
And the technology transfer from Fiat ensured that the plant would be building the best small car diesel engine in the world. But hasn't MUL tried its hand at diesel with the Zen and Esteem? Sure it did, with the generations-old Peugeot TuD5 diesel engines sourced from the Vesoul engine plant of the French PSA Group.
"It was meant for those pockets where there was a strong demand for diesels and Maruti had to have at least a couple of models in the line-up," says Pareek.
The old oil-burners were a tight fit in the small engine compartments of the Zen and the Esteem and the imported engines ensured that it was not exactly an economical operation that could justify large numbers. That's the main reason you will never remember advertisements for diesel-powered cars from MUL.
"With our engine plant, the equation has changed, as prospective diesel car buyers will notice. We do have a premium diesel product and we will play that card well," says Khattar.
The future is dieselDieselisation of Indian metros is already on, and more and more car makers are gearing up. There are reports that diesel powered vehicles, including MUVs, will account for 45 per cent of the market sooner than expected.
Hyundai, which popularised the common-rail diesel engine technology in India with its Accent sedan, already has diesel versions of the Verna, Elantra, Sonata and Tucson. A diesel version of the Getz is all set to give a good run to the Swift Diesel, too.
Skoda is another carmaker that has tasted diesel success in India with more than 80 per cent of its cars powered by the sticky fuel.
"We cannot ignore the fact that diesel cars are getting popular and we will launch the Optra diesel in mid-2007," says Rajiv Chaba, managing director and CEO, GM India. Like Toyota, GM already has diesel-powered UVs in the market but is yet to enter the passenger car diesel segment.
Another threat comes from players who are yet to start full scale operations -- Volkswagen, for instance, is strong in diesel technology.
The Mahindra Renault launch campaign concentrates on common-rail diesel engines too. Add to that list Tata Motors, which is all set to install common-rail diesel engines for its passenger range.
"Competition will be big and we have got an important lead," says Khattar. "How many of them are coming up with a diesel engine plant?
Answer that and you will know how committed MUL is to diesels," he quips.
MUL's Manesar engine plant is a fully-owned subsidiary and it will soon be exporting engines to Europe. "We will export engines to the Suzuki plant in Hungary to begin with. It now gets engines from Fiat directly and we will have to deliver on the quality as well as on the demand front," says Khattar.
Diesel is not an easy fuel to digest. But MUL seems to have the right ingredients in place for a successful run - a captive engine plant, right technology and perfect fit of an automobile to start its mass-produced diesel experiment.
Tata Motors will certainly take note of the new challenge from MUL with great interest since it has tied the knot with Fiat for producing the same engine in India, to power its cars as well as Fiat's. But that is another story two years down the line.