A cheaper Scorpio to attract the young!

It's a month now that Mahindra & Mahindra added yet another variant to its popular Scorpio range.

The new Scorpio EX is 5 per cent, or Rs 41,000, cheaper than the Scorpio LX, but doesn't have many things that the LX has.

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For example, there are no audio controls on steering, cruise control, rain and light sensors and airbags all standard features of a sports utility vehicle (SUV); and it runs on the older generation of diesel engine.

Also, the EX is 60 per cent more powerful than the LX and does not have features like power windows and central locking.

So just why did M&M, which is a market leader in the SUV segment with a 28 per cent market share, come up with another Scorpio variant at a cheaper price point?

The company says the reason was simple enough: it wants to attract young professionals and college goers who had pockets deep enough for a mid-sized sedan but always fancied an SUV for the ruggedness and space it offers.

Vivek Nayer, senior vice-president, marketing, automotive division, M&M says, the company found that the Scorpio's fan base on social media went up from a few hundred two years ago to more than 500,000 now.

Further studies showed that most of these people are in the age group of 18-25 years who haven't bought a Scorpio, but would like to own one only if the price was a little low.

That's the market M&M didn't want to give up. "These people are the influencers of today and are making their parents opt for the Scorpio. They are also the buyers of tomorrow. So we thought of bringing the price point a little lower for them", Nayer adds.

That's the reason M&M decided to avoid its traditional marketing and promotion tools such as television and out-of-home advertisement for the EX variant, and largely relied on online social mediums such as Facebook.

How to price the new variant was a big topic for discussion in M&M corridors. What was finally decided was the price should not be pegged below Rs 7 lakh, even though this was possible due to M&M's expertise in frugal engineering and extensive localization.

Reason: M&M did not want to tamper with the Scorpio's "premium" image as it could have been a self-defeating exercise.

"We are talking about a young audience here who are open to a mass brand, but with a premium tag attached to it", adds Nayer. The Scorpio range now starts at Rs 7.21 lakh and extends till Rs 11.89 lakh.

Not everybody is happy with M&M's positioning of the Ex variant.

"The price cut on the new Scorpio is not huge. Besides the company has not been able to specify the market size it is chasing with the new variant. There may be minor incremental volumes with the new variant but it will be difficult to generate huge orders", says an analyst tracking the company.

M&M is aware of that and knows that it can't risk further dilution of Scorpio's premium image.

Hence, it is working on a new SUV that could be positioned below the Scorpio and which will serve as the entry level model for the company.

Though M&M executives are tightlipped about the new product, the market buzz is that the new SUV will seat up to five occupants and will be powered by a sub-2 litre diesel engine.

M&M's keenness to straddle the entire spectrum in SUV space is understandable considering that penetration of SUVs and other utility vehicles in India is far lower compared to some of the other markets.

India continues to be dominated by compact cars and sedans.

The share of utility vehicles, in fact, fell to less than 13 per cent last year from nearly 14 per cent and 14.5 per cent recorded in the two respective preceding years.

Scorpio, however, bucked the slowdown in utility vehicle sales by posting a 19 per cent increase last year compared to the previous year.

That's not a surprise as M&M hardly has any competition in the affordable SUV segment, except Tata Safari, which starts at Rs 7.90 lakh. Safari is coming up with a new improved version shortly.

But M&M will face tougher competition going ahead. One of the world leaders in SUV segment, Toyota Motors is keen on having its presence in the affordable SUV category in India too. The company has been working on a sub-Rs 10 lakh SUV for launch in India.

Others who are reportedly also looking at grabbing a piece of the Indian compact SUV segment are General Motors, Maruti Suzuki, Fiat, Force Motors and Skoda Auto.

So the Scorpio has to sharpen its sting.