40 years after its first 800, small cars still keep Maruti Suzuki on overdrive

Market surveys commissioned by a core group of bureaucrats and technocrats that the Centre had entrusted to evaluate international partnership options for the government auto company revealed that Indians wanted a low-cost and fuel-efficient car.

The French sedan, which failed on both counts, was subsequently dropped and the search for a partner continued, eventually ending with Suzuki Motor Corporation — the Hamamatsu, Japan-based kei (ultramini) car specialist — being roped in as a junior partner.

And that 40-year-old consumer survey endures even to this day, testified by the eventual success found by Maruti Udyog’s first car that the company didn’t even bother to badge — the 800 hatchback — which, in turn, set off a rare, and enduring, Indian manufacturing success story.

Maruti’s imprint is palpably evident in the industrial boom sparked by India’s automobile sector, which now contributes an estimated 49 per cent to India’s manufacturing output, accounts for over 7 per cent to the overall GDP and has generated more than 30 million jobs.

The secret for success? According to RC Bhargava, a member of the core team that went through a partner selection process (which included France’s Groupe Renault, Italy’s Fiat Auto SpA, Germany’s Volkswagen Group, and Japan’s Fuji Heavy Industries and the other Japanese kei car specialist Daihatsu Motor to finally zero in on the Osamu Suzuki-led Suzuki Motor), the factor that really worked in favour of the new venture was the access to Japanese technology and managerial style insights, with incremental changes done to suit the Indian working environment. “India is a small car market despite all this hype about SUVs (sports utility vehicles) and customers moving towards bigger cars and all that,” 88-year old Bhargava, who is now the non-executive chairman of Maruti Suzuki, told The Indian Express.

The Maruti-Suzuki partnership is now a 40-year old one, and what really played to the advantage of the venture is that it stuck to the initial market survey results, which have endured to this day. In a sector that has been a holy grail for many marquee brands — General Motors, Ford Motor, Harley Davidson, Volkswagen Group company MAN among many that have quit production in India — Maruti Suzuki has only intensified its focus on the small car market and keeps its lead in this high-volume, low-margin segment. Most others who launched with larger cars as their maiden product have largely struggled in the Indian car market — Ford with its Escort three box sedan, Mitsubishi with the Lancer and GM with its Opel Astra, among others.

“The fact is that the majority of customers are small car users and will remain small car users for a long time to come. All these people who came to India, what did they come to India with? Mostly big cars. Who succeeded in India first? Daewoo got success because they had a small car, Hyundai was successful because they had a small car. Tata got successful because they had the Indica,” Bhargava added.

In July this year, passenger cars in the mini and compact segments — up to 4,000 mm in length — saw 1,33,442 units sold out in the domestic market out of the total 1,43,522 passenger vehicles sold during the month. Maruti Suzuki sold 1,05,151 units in the mini and compact passenger vehicle segment.

“No country in the world has 200 million plus scooter owners. A scooter owner doesn’t use a scooter out of choice. He uses it out of compulsion because he can’t afford a car, but his aspiration is to buy a four-wheeler. So what will these 200 million people upgrade to? Has to be low-cost cars. This feeling that India will become a large car market doesn’t recognise the reality of our situation. Lot of people are making this mistake,” he added.

Bhargava has also underscored the problem of rising costs for the affordable vehicle segment on account of regulatory changes, taxes by state governments, and increase in prices of commodities. During the financial year 2021-22, Maruti Suzuki, India’s largest carmaker, hiked prices of its vehicles four times citing input cost pressures.

“Having a reliable low-cost car enables millions of Indians to start economic activities. Today, the percentage of women in the job market as employees or entrepreneurs is much higher than it used to be. One of the things that has made this possible is the availability of low-cost reliable transport,” he said.

But the issue of average household incomes not having gone up in line with other countries has had an impact on the demand and choices for personal mobility options. “Someone has to continue making small cars,” he said.

A lot of Maruti’s success can be attributed to learnings from the Japanese on low-cost manufacturing, a keen focus on the customer and the ability of the Indian management to understand what was being done in Japan and how it could be done in India.

“We were successful versus some of the others because we brought in a different manufacturing system, a different supply chain development system, and a different, evolving relationship with workers and management,” Bhargava further said.

Worker empowerment has been a key factor in this. For instance, Maruti’s blue collar workers have prospered with the company, he said, citing that 98 per cent of the company’s blue collar workers are taxpayers, 64 per cent of workers above 50 years of age have their own houses and an equal percentage of Maruti’s workmen own a car.