Report: Maruti Suzuki Planning Low-Cost Alto to Compete with Nano
By Chris Haak
Even though Suzuki only sells a few thousand cars in the US each month and can’t seem to get the right product mix in the US, the Japanese purveyor of motorcycles and small cars has found incredible success in one of the world’s fastest-growing auto markets: India. The Suzuki Maruti joint venture is the largest automaker in the world’s second-most populous nation, with about 50 percent of India’s market share.
The Tata Nano, however, is the new kid on the block in India, and it’s been selling well, thanks to the car’s staggeringly low price point. A new Nano base model sells for 123,361 rupees ($2,645 USD), and is the cheapest new car in the world. Maruti’s cheapest car, meanwhile, the M800, sells for 192,936 rupees ($4,138 USD), or 56 percent more than the Nano. Just as bad, the M800 can no longer be sold in 13 of India’s major cities because the car does not meet new emission standards. Maruti’s volume model, the Alto, starts at 229,055 rupees ($4,912 USD). It’s no wonder that Maruti’s market share has dropped below 50 percent for the first time as the Nano eats its lunch. From April through July, sales of the Nano handily topped those of the M800, 23,779 to 8,586.
But Maruti Suzuki isn’t taking this lying down. According to a report in today’s Wall Street Journal, Maruti Suzuki is working on a lower-cost version of the bestselling Alto, with a price below the 200,000 rupee barrier. That would put the Alto closer to the M800’s price point, though still fairly far from the base Nano’s price.
Aside from still being more than 50 percent more expensive than the Nano, the problem with de-contenting the Alto to get closer to the Nano’s price point rather than just engineering a new low-cost car to compete more closely with the Nano is that Tata engineered the Nano from the ground-up to be the world’s cheapest car. For instance, the Nano has only a single windshield wiper, it does not have an exterior-opening cargo hatch, and its wheels are attached by only three lug nuts. The Nano even has a special low-cost alternator, low-cost wheel bearings, and basically has extreme low cost engineered into every aspect of the car.
In spite of the inherent disadvantage in price that the Alto will continue to have, Maruti has aggressive sales targets for the Alto in the coming fiscal year. Suppliers to Maruti have said that the company expects to sell some 325,000 copies of three Alto varians in the next fiscal year; currently, the company sells about 240,000 per year.
Aside from the low-cost model, Maruti recently announced an Alto, the Alto K-10, with a larger 998-cc (1.0 liter) engine, upgraded suspension, an improved transmission and brake system, and more rear-seat knee room. The original Alto has a 796 cc (0.8 lter) engine and will continue to be sold alongside the larger-engined variant.
Should Maruti increase its sales as it plans, it will need to unlock additional production capacity. Currently, the company produces its locally-built vehicles at one of two factories, Manesar and Gurgaon, in northern India. The facilities have a combined capacity of 1 million vehicles, but the company has already initiated an expansion of Manesar to expand overall capacity to 1.25 million vehicles by 2012. Beyond that, the company is looking for additional efficiencies in the production process to exceed the so-called installed capacity at the plants.
