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Corporate Mar 26, 2012

Will Ertiga be Maruti's game-changer in 2012?

By Firstbiz Editors

Things are looking up for Maruti Suzuki, India's largest car-maker.

The company will launch the much-awaited Ertiga next month, which will be its first model in the multi-purpose vehicle (MPV) segment. Maruti is pinning a lot of hopes on the Eritga, which it hopes will create a new segment in the car market like the iconic Swift.

"The Ertiga will do what the Swift did when launched, which is create a new segment," Mayank Prateek, managing executive officer, marketing and sales, Maruti Suzuki, told DNA in an interview. "We think it will add to our volumes and help us sustain leadership and in the next 5-6 years, we will see this segment as one of the most significant in the auto sector in India."

Maruti Suzuki will launch the much-awaited Ertiga next month, which will be its first model in the multi-purpose vehicle segment. Screengrab from ibnlive.com

The Swift, after it was launched created a new segment of premium hatchbacks in India. Maruti's hope is the Ertiga will create a new segment of compact MPVs.

The Ertiga will be available in both petrol and diesel variants. While the petrol variant is powered by a 1.4 litre engine, the diesel variant will have a 1.3 litre powertrain. The company claims the petrol variant will deliver a fuel economy of 16.02 kmpl, while the deisel one will give 20.77 kmpl.

Clearly, the car manufacturer is betting big on this model."In India, there are about 15 million cars and about 8 million owners are looking to upgrade, but not all of them are simply just considering bigger cars. They are looking for family oriented MPVs, which is what we are targetting," Pareek told PTI in another interview.

A boost to sales from Ertiga along with an increase in the production of diesel-engine cars (industry sales of which soared in 2011 because of the growing price difference between petrol and diesel) are expected to help Maruti post better sales growth in the new financial year starting 1 April than the industry's expected growth of 5-10 percent.

That's quite a turnaround in sentiment for a company that struggled with a spate of high-profile labour strikes and severe production cuts in 2011. Maruti's mood remains upbeat even despite a hike in prices of its vehicles by up to Rs 17,000 following an increase in excise duty in the Budget.

Under the new pricing, the company's model Alto (800 cc) will cost Rs 4,200 to Rs 5,900 more, while the Swift will now cost Rs 7,700 to Rs 11,900 more depending on the variant, according to a PTI report. The Swift Dzire will cost Rs 8,500 to Rs 12,700 more.

In a bid to boost sales of diesel-engine cars (one out of every two cars sold industrywide is currently a diesel-engine car), last week, the company said it will invest Rs 1,700 crore for its first diesel engine plant in India, which will come up at its Gurgaon facility, according to a Mint report. The plant, which will come up by the middle of 2013, will have an initial capacity of 1,50,000 units, which will be doubled to 3,00,000 by the following year.

Currently, Suzuki Powertrain produces 300,000 diesel engines for Maruti. Suzuki Powertrain is a 70:30 joint venture between Japanese car maker Suzuki Motor and Maruti Suzuki.

The car maker also plans to halt car production at Gurgaon eventually, which will become an engine-making hub. According to a report in The Economic Times, any additional capacity for car production is likely to come up in Gujarat, which looks set to get a two-million-cars-a-year facility in Mehsana. A final decision is expected by June. A land purchase deal is expected to be sealed in the next six weeks.

It seems like Maruti is finally making the news for all the right reasons. In anticipation of improving sales in the months ahead, some leading brokerages like Standard Chartered Research, HSBC Global Research and Credit Suisse have turned bullish on the company's shares.

After being battered by poor sales for most of last year, 2012 may very well be the year that Maruti makes its comeback in (Ertiga) style.

by Firstbiz Editors

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