However, he has rather tricky -- and entirely unenviable -- tasks before him: tackling competition from foreign auto giants, a rapidly evolving market, and diverse policy changes.

While former Maruti chiefs R C Bhargava and R S S L N Bhaskarrudu, only had to handle the politicking between the government and Suzuki Motor Corp, Khattar has to deal with the growing power of competition and the falling fortunes of Maruti Udyog.

He, however, knows his way along Indian roads and feels that competition is best handled with the right mix of pricing strategy and novel marketing techniques. He explains his strategy for a beleaguered Maruti Udyog Limited:

Do you feel that Maruti's days of glory are over?

I do not understand why people are hung-up on the yesteryears. The market that Maruti currently operates in is not at all similar to what it was in the 1980s or even early 1990s. The market is perennially evolving -- and it is very important that this happens. Only then will the Indian automobile industry be truly global in stature.

Market evolution means that the consumers have more choice, there are more players in the market, there is healthy industry growth and volume sales increase. In such a scenario, it would be downright absurd to believe that any company would maintain the kind of monopolistic position it enjoyed, say, a decade ago.

For instance, when Maruti was launched, it challenged the hitherto market leader Ambassador. But that does not mean that Ambassador has no place in the market today. Hence, when there are more players, the market share of those having a bigger pie earlier is almost certain to decline. And in any case, it is unnatural to have a market share of 80 per cent in any market. It does not happen in any open market: be it Japan, the United States, Germany or elsewhere.

Does that mean you are not concerned over the growing popularity of Hyundai Santro?

We are not an insecure company. We don't fear any brand or competition. The so-called runners-up in the automobile market have only 15 per cent of the market share. Now, I would not call that a close second. India produces 1.2 million cars a year. Of these, Maruti produces 350,000. Obviously, the rest are catered to by other brands. But does this mean our products are less attractive? I don't think so.

The sales volumes of M800 and Omni have fallen drastically during this year. Is cutting prices on various models the only way to fight the competition?

The move to cut prices on M800 and Omni was not aimed at just fighting the competition. We wanted to take the lead in revving up the entire industry which was not doing too well, of late. These cars are entry-level models and, hence, a price-cut will definitely get more people interested in buying the car.

These models are highly price-sensitive. Early this year, prices of these models were hiked due to improved technology inputs. Then there was increase in sales tax. These two factors affected the sales of these models. We have responded to this and addressed the problem with a price-cut. This will help the entire industry because such low prices will encourage second-hand car buyers to pick up new ones instead.

Doesn't the cut in prices affect your bottomline?

It is not just the price-cut that will affect profits. We have made considerable investments as well. The new models we launched last year also required substantial investments, including building additional capacities to meet sales growth in the future. We were also hit by a weak rupee and a stronger yen that made imports expensive, further adding to our costs. Our vendors need to import components from Japan and we had to absorb the additional cost. This has cost us almost Rs 7 billion.

In the current competitive market situation, we cannot pass on this cost to the customer. Hence, the way out is to cut costs.

We are working on improving efficiencies -- both, production and cost. We have teams to address areas like speeding up the localisation of components and discussing cost-cutting measures with vendors. However, margins are under pressure for every car manufacturer.

You have Maruti Zen and Wagon-R playing almost in the same market. Do you fear cannibalisation?

Not at all. Each model has its own buyers. We don't think a Wagon-R buyer will settle for a Zen or that a M800 buyer will move up for a Zen. These are specific models which talk about the customer's personality: the car always complements the buyer's personality. A customer never compromises on this.

Where do you think is the Indian auto industry headed for?

I would say it is finally evolving and, over a period of time, there will be a shake-up, realignment and consolidation. Globally, there are pressures on car manufacturers to consolidate -- there have also been some mega-mergers and realignments. A similar scenario may unfold in India, too.

Don't miss the concluding part of our special report on Maruti tomorrow!

Part I: Maruti hits the skids, sales plummet

Part II: Maruti aims to zoom ahead via price-cuts

Part IV: Foreign car-makers closing in on Maruti

ALSO SEE:

The Maruti Saga

Design: Lynette Menezes

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