But the Indian automobile giant has a plan: one that, it thinks, could drain all its woes away. It is called price-cuts.

Maruti, with its back to the wall and trying desperately to regain its lost glory, has slashed prices on three of its models. Analysts believe that the price cuts have been effected to stem the rot, so to speak, as for the first time the company's market share has fallen below 50 per cent. However, Maruti claims the move is a 'strategy to rev up the dull automobile sector'.

Maruti has drawn up a detailed blueprint to address the issue. Besides price-cuts, it plans to launch new models and explore fresh marketing avenues.

As the first step towards the implementation of its multi-pronged initiative to beat the competition, Maruti pared the prices of its Maruti 800, Omni and Wagon-R models. Says MUL Managing Director Jagdish Khattar, "The automobile market has been listless because of the uncertainty over the sales tax issue. Yet, we believe that Maruti Udyog should take the lead in getting the market up and going once again. This is why we have unleashed an aggressive pricing strategy."

In May 2000, Maruti reduced the price of its M800 STD model to Rs 2,12,446 for the MPI version, (the Euro I M800 STD will now be available at Rs 198,979), while the Maruti 800 EX will be available at Rs 241,796 and the Maruti 800 DX at Rs 259,569. The Wagon R LX will now cost Rs 343,763. (Prices ex-Delhi)

"In the recent past, a combination of cost- and tax-induced increase in prices and an uncertain sales tax regime had adversely impacted the auto makers. To revive the market, Maruti has repositioned the entry-level price point for a limited period. In addition, the Wagon-R LX, which has emerged as a strong player in the B segment, will be offered for a limited period at a more attractive price. We will kickstart the market out of its current stupor. With the finance ministers' conclave laying the rollback issue to rest, we believe this is the correct time to stimulate the market with aggressive pricing," says Khattar.

Khattar calls the price-cut the 'Second Revolution' as MUL tried to thwart Indica's challenge by slashing the prices of M800 in early 1999. "Our price-cut strategy in early 1999 contributed to a phenomenal 60 per cent growth in the automobile market," claims Khattar.

But will the pricing strategy work?

However, auto experts and former managing directors of Maruti believe it will take more than just price-cuts to see the sales graph shooting up again.

Says former MUL MD R C Bhargava: "I do not think that a market is tackled by a pricing strategy alone, especially in the automobile industry. For one, it is not as price sensitive as the consumer durables market. What the company needs to do is shed its complacence and take the competition by the horns. After all, MUL has been in this business in India longer than 'they' have. MUL has a better understanding of the market."

But what does Bhargava have to say about MUL's falling market share. "Yes, the figures may be coming down. But are the overall volumes also falling? As of today, MUL has more models coming out of its stable than any other company in India. Now this means that a potential Maruti Zen customer might decide to buy a Wagon-R if it suits him. So a growing market only means that volumes go up and there will be enough for everyone."

Tackling the issue from all sides

The figures, however, tell a totally different story. Even in a growing market, Maruti's pie is shrinking. MUL, meanwhile, has decided to tackle the challenge on all fronts -- including the Net. According to a company spokesperson, MUL plans to sell its cars through the Internet making use of e-commerce.

"We will be among the first ones to tap the market via the Net. We are going beyond the traditional medium to rev up the entire market, not just the Maruti sales graph. For instance, e-commerce is going to happen in a big way in India and we want to be among the first ones to tap the market then. We are doing a lot on the Net with our own sites and cross advertising on other sites. This will change the way cars are sold and bought in India. And the more avenues we tap the better for the industry as a whole."

Besides, Maruti also plans to displace the good old Ambassador from the taxis and government vehicles segment. Says Khattar, "This is one area where we can increase our sales tremendously. We have already begun our attempts towards this end. For one, we have CNG-powered, environmentally fit vehicles which are best suited as taxis and government cars. We are also offering discounts to taxi owners to buy our cars. If we are able to convert old cars into new green Marutis, our sales will leapfrog by at least 10 per cent."

Bottomline seen under pressure

Despite putting the company in an overdrive on sales efforts, Khattar admits that MUL's bottomline will be under pressure in the current fiscal. And this takes into account its projections for a 15 per cent growth in turnover this year.

However, Khattar is optimistic on sales volumes: "We expect the automobile industry to grow at 12 to 15 per cent this year and Maruti's growth will be in line with that of the industry. Our sales turnover is expected to grow at 15 per cent, but the bottomline will be hit. Margins will also be under pressure. We have made huge investments at our Gurgaon plant and there is a fair amount of depreciation arising out of these. In addition, the financial costs of introducing new models will also put pressure on our profits."

'New models will see us through'

Once the pricing strategy and new sales avenues are in place, Khattar believes that new models will be the next best bet to beat competition.

"Consumers have matured. New models are something they have taken in their stride and we feel the need to introduce people to newer products from Suzuki which are appropriate for the Indian market. This is why we have also showcased the concept car YMO and the Suzuki C2, a compact 2-seater sports car, which was a reference vehicle at the recent auto expo. One of the new models which is expected to hit the roads is the 'Carry Pick-up'," said the Maruti chief.

Part I: Maruti hits the skids, sales plummet

Part III: It is unnatural to have 80% market share, says Khattar

Part IV: Foreign car-makers closing in on Maruti

ALSO SEE:

The Maruti Saga

Design: Lynette Menezes

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