India's largest car-maker, Maruti Udyog Ltd, is planning to bring down the price of its B-segment car Alto from Rs 300,000 to around Rs 250,000.
The Alto will be positioned as an alternative between the entry-level Maruti 800 and Zen, WagonR and Hyundai Santro to wean consumers from the B segment.
Suzuki has already agreed to waive royalties on the Alto for the domestic market between April 2003 and March 2005. It has also granted a 10 per cent discount on import of knocked-down components, except those for the Alto built for exports, during the same period. Discounts are already applicable for the Alto built for exports from February 2003 to January 2004.
The Alto will also reap price benefits arising out of research and development efforts in India and subsequent localisation. Maruti plans to source dies for the Alto from less expensive sources like Taiwan. A new foundry being set up by Maruti and Suzuki will manufacture components such as cylinder heads, cylinder blocks for aluminium engines and transmission cases and further reduce costs.
Maruti Udyog managing director Jagdish Khattar said on Wednesday that the Alto would be repositioned from a competitor to B-segment cars to a top-end A segment car.
"We will offer consumers more value-for-money and more choices. The price differential is bound to bring about a shakeout in the B-segment of the car market," he added.
However, in the draft red herring prospectus filed with the Securities and Exchange Board of India ahead of its initial public offer, the company has said it will continue to focus on the sales of the Maruti-800. The Alto will complement the base model at the higher end of the A-segment, comprising cars priced below Rs 300,000.
The company recently told analysts it did not see the small car market, which constitutes around 85 per cent of the total car market and the marketshare of Maruti, shrinking in the next several years.
Maruti has at least five models in the A and B segments, while its competitors in these segments have one model each--Hyundai has the Santro, Tata Engineering the Indica and Fiat Auto the Palio. None of these players have been able to scale down prices so far.
They have only upgraded their existing models into more expensive variants or are planning to bring in more expensive vehicles like the Hyundai Getz.
"This indicates, Maruti is the only company in the country with the potential to penetrate the deeper pockets of the market with low-priced vehicles. We are trying to achieve these price points at the earliest," Khattar added. Maruti has also tied up with the State Bank of India for financing, and expects the bank's rural network to help increase its penetration.
In 2002-03, Maruti had a marketshare of 64.9 per cent in the A and B segments. The company also claims a marketshare of over 40 per cent in the B segment. It is the only player in the A segment.
