Interview with Shashank Srivastava, Chief General Manager, Marketing Maruti Suzuki India Ltd.

Coming to Indo-EU trade agreement, would it lead cheaper imports in the country for some players?

I think surely it can’t be skewed for very long as it’s not possible for this thing to happen only in Europe and not with other places and my belief is that, where ever there is too much skew, it does not continue for very long.

The top-end manufacturers often fight over the youth factor in their sales? Does Maruti have to worry about such things or is it too large a company which is loved by the youth and all across different ages?

I think it is a real factor in the Indian economy and it is true for any growing economy that has a demographic profile like India. You know the average age for an Indian today is 24.5 years which is second youngest after South Africa. This young population is quite different and these people are more into experimenting ....they want the latest in design and their thinking is quite different. Maruti has been somehow associated with more conservative values. Probably that is the reason why it’s not that aspirational to younger people. We would definitely like Maruti to be aspirational. The proportion of the younger buyers is increasing and the average age has come down. In fact we have been taking actions in three areas for appealing to the youth and to the values the youth signify. One is product. The design of our products now take into account the more exciting, sporty, edgy sort of thing, the one you see in A-star, Ritz, SX4 and Swift which started a new revolution in the upper hatch segment. These have been done keeping in mind the young buyers. The second area that we have worked is communication....the type, the tone of our communication to our consumers. The use of media especially digital media is important. The young buyers use social media. We have been using it extensively for our campaigns today. Third is our interaction with our consumers. Our dealerships and our networks and the infrastructure of the dealership need to be in line with the taste of the modern times. The young buyer of today is exposed to much more of retail experience. In our times there was no great retail experience, even the choice of goods was limited but today you buy vegetables from air conditioned malls. It’s not about high-end products it’s also about items of daily use. It is something Maruti can’t ignore even if we have products across all categories. Some things like value for money and reliability, which Maruti signifies, are not going to go away. The cost of ownership even for young buyers is very important but it is the image part that we need to work on.

Does the communication change as you go into the interiors of India?

Absolutely, in rural areas where our sales are 20pc, there even car buyers don’t read newspapers many times. No point in advertising in newspapers and channels or even on social media because many don’t have an internet connection. There it is more of local selling so communication is not only through mass media, it is also through personal selling. We make sure that in rural areas we have one sales executive of a dealer who is of local region. You can’t put a person from a city to a rural place. If we did that people would not trust, because they are wary of large showrooms and unknown people. You have to have the trust factor much more that is why there is a local person. We have to have a RRSES- regional rural sales executive in every district and he has to be a local guy.

But you also train them?

 Yes, absolutely. For example in some places there are large cash purchases because the farmers buy when they sell their crop. Therefore they will buy only in the harvest season. So your efforts in harvest -time is different from non harvest time. So those are the other things that you have to take care of. I have seen companies doing ads in languages which are not local, thus that does not make sense. The good thing is that once you have trust, if one person buys from the same brand it is likely the other person will also buy from the same brand. In that sense we have a first mover’s advantage and I think it will stay with us for a very long time.

Are the rising fuel prices, interest rates and input costs a dampener to auto sales?

Absolutely, no doubt! The two industries of real estate and auto are the big ticket items that consumers buy in their lives. So if you ask me the biggest purchase I ever made is my house, the second biggest purchase I ever made is the car. These are the two for which you have to take a loan. In case of auto, 70pc of our purchases is by finance and any change of interest rate is going to change the economy for a person running a household. So even if the house rate goes up and the car rate does not, it will still affect the car sales because a larger portion of his income is going to house EMI, the remaining balance is much lesser for car purchase.

So there is a direct co-relation?

It’s almost a direct co-relation. Thus, if greater EMIs flow into home loans and even if you have same EMI for auto loans, it is going to affect you negatively. Inflation is very bad for our industry because the sentiments are quite related to inflation, business profitability is related. Also input costs, where generally commodity prices go up and there is buoyancy in our economy. So the buoyancy brings in higher commodity prices and pushes down the profitability and to overcome this you need to increase prices and we have done in January and April like all manufacturers. Once that happens there comes a point when the value equation changes for the consumers. So you can’t increase the prices indefinitely at some point of time and that time has happened in the last six months. Due to fuel price hike, high interest rates, there is a low sentiment. Today the market situation is not that buoyant and we find it difficult as we have high inventory at dealerships.

Yet the company is on an expansion mode, your new plants are coming up, also there were reports that the MD of Maruti was in Gujarat to look for a new place. So what are the plans ahead?

In the long term we are extremely bullish, our projection is that by 2015-16 the market should be anywhere from 4.2 to 4.5 million units. This long term projection is based on 7-8 different methods. It is not as if we are just going by the past strength. We have observed how other markets have grown in similar sort of phase and their economic growth cycle. Japan, Korea, China, Mexico, Brazil, Poland and Russia follow the same pattern roughly in terms of correlation in per capita income around 1,500 dollars or so, is the time in real terms when suddenly there is a increase in motorisation. The second method that we follow is that our penetration is only ten cars per thousand people, so the scope is much higher, as compared to Japan or US where it is 600 or 700 per thousand. The scope of upside is very much there. We have related with income level growths in various segments like middle income or upper income group so on. All pointers are that the market would double in roughly five years and we believe in that and that is how investment plans are looked at. You could have short term blips like the ones we are witnessing once in a while.

Are you bullish about export markets or is it the domestic market that is better?

I think India is still evolving as an export nation.  Last year our exports from India were less than the previous year, but that is dependent totally on the countries that we export. In Europe there was a big drop in export last year because the European economy was coming out of real bad times. In the previous year we sold about 147,000 units out of which 120,000 units were sold to Europe. But last year Europe sales were roughly half of previous year and we made up a lot by selling in non-European countries. The export front on the future would also depend on our policies and acceptance of our vehicle. In abroad there is not so much growth. The thing is that we must find markets where there is good growth. Of course in developed markets even if there is no growth it still constitutes a large share.

You have been with Maruti for quite some time. How has your experience been with Maruti?

Immediately after my MBA, i joined Maruti Suzuki- almost 20 years time. At that time the market was very small. I remember discussing that we should do 90,000 units in a year. It was a tight market and there was a waiting period for most of our models. There was very little choice for consumers, there were long waiting periods and market volumes were very low. There was no competition. Once we had liberalisation there was sudden change and volumes went up, competition increased and the waiting period dropped. Suddenly you had to look at quality of operations much more closely and I have seen this change and I think it is a great change for the Indian economy, for the industry and I have enjoyed this journey. Sometimes when I look back, I see a dramatic change and something that the new generation can’t imagine. But I think it has been a great experience for me and I also believe that this competition has brought in a huge change in the Indian industry and has given it an edge that will help us develop into a great manufacturing base for automobiles.