The Hindu Business Line : A-Star launch may revive Maruti volumes

The launch of the A-Star may be just what the doctor prescribed for Maruti Suzuki in the present scenario. Placed at the upper end of the compact (A2) segment, the A-Star could well revive the company’s flagging domestic volumes in this segment. Exports can also receive a leg up from this launch.

Boost to compact portfolio

A key reason for the fall in overall sales volumes of the company in the past few months is the poor show by the compact cars (Alto, Wagon R, Estilo, Swift). Volume growth in this segment has shown a declining trend since June this year. For October, growth fell by 8 per cent year on year. Apart from the high interest rate regime, model fatigue and increased competition from the i10 and Chevy Spark seem to be the predominant reasons for waning interest in Maruti’s compact cars.

Consumer interest

A launch at this time is likely to trigger consumer interest and provide the much-needed stimulus for the company’s volumes. This is suggested by the current trend — throughout the period of the slowdown (since early 2007), launches, be it bikes or cars, have fuelled growth.

Maruti itself has been a beneficiary of this trend, thanks to the SX4 and Dzire (A3 segment) introduced during this period.

This segment has grown by 37 per cent in the April-October ’08 period at a time when the compact segment could muster only a 2.4 per cent year on year growth.

Exports to rise

Exports could also improve from the launch of the A-Star as Maruti is targeting export of about 1,00,000 A-Star cars by 2010-11.

The prevailing slump in the global auto industry may raises concerns on the export front.

But the company’s well-diversified markets across 150 countries including emerging economies of Latin America, Africa and Asia suggest that it is likely to meet its export target.

Also, given its high level (95 per cent) of localisation and the prevailing conducive environment for exports, this launch may further improve realisations in the following quarters.

Related Stories:
Maruti A-Star to be launched in Nov
Maruti Suzuki to launch A-Star by month-end
Maruti leads as auto sales, exports look up in Sept
Maruti Udyog stops Alto exports to Europe

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