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Maruti dreams of Rs 100 bn sales by FY01 - Views on News from Equitymaster
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  • Aug 21, 1999

    Maruti dreams of Rs 100 bn sales by FY01

    India's largest car manufacturer, Maruti Udyog Ltd. (MUL), aspires to achieve sales of Rs 100 bn by FY01. For this, the company has to function at a production level of 500,000 cars p.a.

    Until two years ago, the small car segment was dominated by Maruti, which had a near-100% market share. With the arrival of competition, Maruti has found it a struggle to protect even its existing market share, let alone increase it. 1QFY2000 passenger car sale figures reveal that new entrants like Hyundai, TELCO and Daewoo have eaten into Maruti's market share, which slumped from 83.8% in 1QFY99 to 68.9% in 1QFY2000.

    In April-May 1999, Maruti was the laggard in the car segment with 13% growth, while the segment clocked 35% growth during the same period.

    One reason why Maruti surrendered market share in 1QFY2000, was due to the fact that it could not sell its cars in the National Capital Region (NCR). This is so because Maruti's products did not comply with the Euro I emission norms. Meanwhile Maruti's competitors - Daewoo (Matiz), Hyundai (Santro) and TELCO (Indica), have already complied with the emission norms. Maruti is confident of meeting the Euro II emission norms much before the specified date.

    Maruti's target of Rs 100 bn sales seem achievable, but the company will have to continue offering innovative products to slug it out with its competitors on an even keel. Over the past few months, the small car segment has already witnessed a price war, with virtually all manufacturers (including Maruti) being forced to slash prices. The small car segment is no longer a margins game, but a volumes game.

    The scenario in the mid-sized car segment is dismal. On the one hand, there is no increase in demand, while on the other hand, competition has increased manifold, with practically all major manufacturers including GM, Ford, Mitsubishi and Honda setting up operations in the country.

    Over the next few years, Maruti aspires to maintain market share of over 50%. This will be possible if Maruti learns it lessons, and innovates quickly to match competition. The company has firmed up plans to launch a car in each segment. From here on, there will be an interesting tussle on the cards between Maruti and the other automobile manufacturers.



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