Maruti Revamps Alto K10 to Counter Slow India Recovery

Maruti Suzuki, which sells almost one in two cars in India, is betting a new version of its bestselling model will help it retain a stranglehold on the budget market, even as it courts wealthier buyers to fend off a slowdown in sales.

Maruti on Monday unveiled a new version of its entry-level Alto -- India's most popular car last year -- with automatic gear shift technology, a feature usually reserved for pricier cars in the Indian market.

Automatic cars are still rare in India but they have the potential to be popular in a country where roads are often in poor condition and traffic snarl-ups are a daily feature of urban driving.

At Rs 380,187, the Alto K10 is the Indian market's cheapest automatic car -- a position previously held by Maruti's compact sedan Celerio at about Rs 410,000.

"Definitely, Maruti is moving up the price ladder and that is obviously in tune with the expectation of the urban consumers," said Puneet Gupta, associate director at consultants IHS Automotive.

"On the other hand, we have 70 percent of the population living in rural (areas) and with the network that Maruti has, definitely they are not losing sight of that consumer also."

Maruti Suzuki is preparing for what it has said will be a period of slower sales in the coming months. Sales of Maruti's passenger cars fell 1.1 percent in October from a year ago, breaking five consecutive months of increase.s

It warned last week of slower growth in the second half, dampening expectations of a rapid recovery in an auto market that is hobbling back after two weak years.

"NEW CARS, BETTER TECHNOLOGY"

Part of the effort to counter that slow return to health is a move up-market, to cash in on India's growing urban middle class and improving consumer sentiment under Prime Minister Narendra Modi's government, elected earlier this year.

Best known as the brand that made cars affordable for Indian families with the Maruti 800 in the 1980s, Maruti took a second stab at the premium sedan market with the launch of the Ciaz car in October and has set an aggressive sales target for itself.

It plans to launch its first sports utility vehicle (SUV) between April and June 2015 to capitalise on one of the fastest-growing car categories, dominated by Ford Motor Co and Renault SA, in Asia's third-largest economy.

But it hopes to hold on to its historic area of strength at the budget end too, the company said, thanks to innovations like the new automatic Alto.

"People are trying to come into the right products because the small car (market) is now getting crowded," said Maruti CFO Ajay Seth said last week after the company reported quarterly earnings.

"We have to bring in new products, better technology," said Seth, adding automatic cars and SUVs were two such examples.

That, it hopes, will help it keep customers even as their wealth rises -- rather than watch them trade in their Maruti for Honda Motor Co and Hyundai Motor Co.

Passenger car sales in India, expected to be the third-largest market by 2018, are forecast to rise between 5 and 10 percent this fiscal year, after two years of declining sales.

Copyright: Thomson Reuters 2014