Small cars, Maruti’s “bread and butter” sector, may no longer include butter.
Maruti Suzuki, a 35-year-old company that began as an entry-level automaker and capitalised on the success of these cars to dominate the market, currently only receives 25% of its sales from this sector. Not long ago, this market contributed over half of the automobile manufacturer’s sales (2011-12). Even though overall sales are still growing by double digits, the tiny segment, which includes small automobiles up to 3.6 meters in length, has seen its market share decrease for four years.
Veteran auto executive and battle-tested chairman Mr. R C Bhargava is faced with a conundrum as Nitin Gadkari raises the stakes for automakers on road safety regulations: Will the hatchback client, who has just upgraded from a scooter and is combating fuel and food inflation, pay more for safety? The CEO of India’s largest automaker, which produces over half of the country’s automobiles, has a gut instinct that he won’t.
According to research from The World Bank published in June, India is responsible for approximately 10% of all crash-related fatalities despite having only 1% of the world’s automobiles. Of course, India’s roads are in terrible shape. Still, for the time being, the government is concentrating on enforcing more car safety regulations and has tightened the noose to hold automakers more accountable.
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IRC Bhargava recently stated in an interview with The Times of India that the automaker will not be reluctant to “discontinue” small cars if they become unprofitable due to government policy interventions, such as the proposal to make six airbags required starting on October 1. In a market where prices are competitive, Maruti is renowned for offering compact, inexpensive automobiles.
“If the policy becomes such that small cars don’t remain viable, we will discontinue them. ” Bhargava believes that the company does not make a sizable profit from selling the compacts. “The question that we need to ask is that is it a good thing for the country if low-cost cars disappear from the market, the car industry will slow down. There will be less employment in the auto sector.” Bhargava asserted that Maruti does not rely as heavily on little cars as is commonly believed.
Small automobile market share is dwindling.
Although the small car class now holds a 40% market share, Bhargava noted that this segment’s sales have declined for the past three years.
He claimed that the compact car industry is already contracting due to the increased expenses.
Due to the recent increases in small car pricing, middle-class individuals who are typically first-time automobile buyers and view these vehicles as an upgrade from a two-wheeler find these vehicles to be astronomically expensive.
He compared how little automobiles were once the bread and butter of the auto industry, but now only the bread is left.
Nitin Gadkari recently approved the draught notification for the Bharat NCAP (New Car Assessment Program), which would evaluate the safety of all cars sold nationwide.
The introduction of the Bharat NCAP will begin on April 1, 2023, according to the government. The crash test ratings for the cars will range from O to 5. The sales of small cars may suffer further if obtaining a Bharat NCAP crash test rating is made mandatory for all vehicles, making their production unprofitable.
