Part I:
    Maruti's falling fortune    have forced the company
   to take notice of the    competition

The automobile giant's falling fortunes have made it sit up and take notice of the competition that had once been dismissed with a sneer. If the sharp decline in the sales volumes for May 2000 gave Maruti a start forcing it to cut prices on three of its models, the figures for June promise to give it a rather nasty headache.

Maruti, which enjoyed a near-monopoly in the small car segment, saw its market share falling to a measely 56.3 per cent from a high of 74.6 per cent a year ago. In May 2000, MUL reported a 24.5 per cent drop in sales at 25,765 units compared to 34,122 units sold in the same month last year.

In June, Maruti's share plummeted even further, dropping for the first time to an all-time low of 46 per cent with sales sharply dipping by 34 per cent to 15,898 units.

Sales of its new offerings -- Wagon-R and Baleno, besides its bread-and-butter Maruti-800 - plummeted during the last two months.

So what has led to this decrease in sales? Jagdish Khattar, MUL managing director, says, "This question has been haunting the industry for quite some time now. But nobody seems to realise that with more and more companies entering the market its size has also increased. This, in effect, means that the overall market share might come down in percentage terms, but the volume figures would actually go up."

However, there seem to be few takers for Khattar's optimism. Alarm bells have been sounded in industry circles. MUL's share of the cake is being eaten away by Daewoo Matiz and Hyundai Santro, which have seen their sales figures rise considerably in the last couple of months.

For instance, Korean Daewoo sold a total of 6,033 cars in May compared to 2250 units in April 2000 -- a growth of 2.7 times. Its rival Hyundai Motor India sold 7,561 cars during the month.

Giving MUL's Esteem a run for its money is Ford Motor's Ikon which recorded a sales figure of 1,697 units in May against 1,592 units in the previous month. The company has sold 9,556 units of Ikon in the first six months since launch. Maruti's luxury car Baleno too is being taken for a tough ride by Honda Siel's City and Accent which together registered a 24.4 per cent growth in sales in the last two months.

In the mid-size segment, Hyundai emerged as the market leader by selling 1,710 units of Accent, while Ford India was close behind with sales of 1,697 units of Ikon.

Maruti was pushed to the number three slot as it could sell only 1,134 units of Esteem and Baleno. Its sales in June declined by 17.6 per cent to 73,447 units during April-June of 2000-01 against the industry growth of 10.5 per cent during the period.

Decline in small car segment hurts Maruti most

It is not, however, the luxury segment that is hurting MUL the most, but the poor performance of the small car segment. Hyundai recorded a 67.3 per cent jump in sales of 7,561cars this May compared to 4,519 units during the month in 1999.

'Image, too, is getting a beating'

According to analysts Maruti's image has also suffered. Says auto expert Murad Ali Baig, "It will never be the same again. Customers now have a choice and obviously the best car will win the race. The image has also taken a beating ever since Hyundai Santro hit the television screen with its ad blitz claiming that there was a computer in the engine. Matiz, too, is giving the M-800 a run for its money and is being sold as a world car."

'Customers seem less satisfied'

A Sales Satisfaction Index study conducted by internationally renowned automobile survey agency JD Power & Associates' Asia Pacific arm has found that customers give Honda and Mitsubishi a clean chit when it comes to customer satisfaction.

Maruti on the other hand comes way down the chart ranking seventh after Ford, Mahindra & Mahindra, Daewoo Motors and Hyundai Motors.

Chris Bonsi, director, JD Power Asia Pacific says, "The study shows the customer's satisfaction on the basis of sales experience, explanation at delivery, price evaluation, delivery timing, salesperson knowledge and post delivery contact."

Sales experience is the most important factor, accounting for 37 per cent of the SSI score, and includes issues such as fulfilment of commitments and lack of hassles during the sales process, overall honesty and integrity of the dealership personnel and sufficient time to make the decision.

"The dynamics of selling cars is changing and manufacturers and dealers who fail to meet the rising needs and expectations of their customers will lose out to those who can. Buying a new car is an experience customers will remember for a long time and ensuring that this experience is a satisfactory one is essential in building brand loyalty and customer advocacy," Mr Bonsi added.

Khattar, however, is a die-hard optimist. "We expect the automobile industry to grow at 12-15 per cent this year and Maruti's growth will be in line with the industry's growth. Our sales and turnover is expected to grow at 15 per cent, but bottomlines will be hit,'' he believes.

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