The alliance between Japanese car major Suzuki and German auto giant Volkswagen is all set to benefit Maruti in a huge way. Suzuki and VW will work jointly at producing cars for the world market in the coming future and Maruti Suzuki is bound to eat a piece of the pie.  Volkswagen had bought out 19.9% stake in Suzuki earlier this year and both companies intend to work together to bring down production costs. Interestingly VW had stated earlier that it could take Maruti’s help in developing its new small car (placed below the Polo). The companies do not plan to retail each other’s vehicles through their channels. In any case, this is certainly good news for the consumers.

Maruti Suzuki has been the king of the road for the last 2 decades with atleast half of all cars on the road being produced at its stable. Maruti was commanding close to 53 percent market share but in the past few months it has dipped to 47 percent. A cause for worry maybe?

Intense competition has come from new players like the Ford Figo, Chevrolet Beat, VW Polo and the Nissan Micra to name a few. Seemingly Maruti has been caught napping. Take the example of the Maruti Swift. No doubt its a best seller but the top of the line Swift diesel does not even offer airbags, rear wiper and defogger. Buyers are smart and the time has come wherein few want to compromise on safety, especially if another company is offering just that. 47 percent may still be a big chunk of the market share but unless Maruti steps up its game, the future is not looking to bright. Maybe Maruti dominance is coming to an end?

Within 10 months of starting production of the KB-series engines, Maruti Suzuki has rolled out over one lakh of these next generation engines that power the two small cars, A-Star and Ritz. The fuel-efficient technology will soon be seen in other existing as well as new models. The company produces Bharat Stage-III, Bharat Stage-IV and Euro-V emission norms compliant KB-series engines. It produces two different petrol engines, 1 litre (A-Star) and 1.2 litre (Ritz), from the fully integrated engine manufacturing facility, located at Maruti’s Gurgaon plant.

Maruti has stopped working on LPG models as it will roll out CNG variants of the entire range of its cars from early 2010, the first of which could be the Alto. Since CNG was available only in 11 Indian cities at present, such versions had so far not been launched by Maruti. Compressed natural gas (CNG) is a more environment-friendly alternative to other fossil fuels, such as petrol or diesel.

“We have prepared a road map for launching our cars in the CNG format and a pilot project is already under way,” Maruti Suzuki chief general manager (marketing) Shashank Srivastava said. “External CNG kits can be fitted in our cars, but when we launch our CNG models, it would be much cheaper due to the economies of scale,” he added.

Maruti Suzuki plans to take the A-Star to new markets, such as Africa and the Latin America. Maruti is looking to tap new markets for exports, as the demand is shifting towards compact cars globally. This would help Maruti meet its target of exporting 1.5 lakh cars, across all models, in the current fiscal, two times that of the year ended March 2009. Maruti exports doubled to 15,978 units in the April-May period led by A-Star.

“After its success in Europe and sufficient backlog of bookings, we have finalised strategy to enter other markets. A-Star comes with the new highly fuel-efficient K-series petrol engine, which is Euro-4 and Euro-5 complaint and will allow us to market the car throughout the world,” Maruti Suzuki executive officer (marketing & sales) Mayank Pareek said.

Pitched as an export product, A-Star is already being shipped to France, Italy, the UK, the Netherlands, Germany and other major markets in Europe by Maruti. Maruti had developed A-Star originally for Europe, where it is sold under various brands, such as Alto, Pixo and Celerio, in different markets. Maruti will now sell the car in Algeria, its biggest market in Africa, besides Chile, Mexico, Malaysia, Sri Lanka and Nepal and around 50 other markets, where it has sales and distribution network.

Maruti Suzuki has announced that it has it has already shipped out 30,000 units of  the A-Star to be sold by Nissan in the UK under the name Pixo. Just like its initial shipment of 2,000 units in April, all the cars have been exported from Maruti’s dedicated port at Mundra in Gujarat.

The 5-door hatchback car, which has been contract- manufactured by Suzuki Motor Corporation’s Indian arm for Nissan’s left-hand drive markets in Europe, essentially a rebadged and restyled version of Maruti Suzuki A-Star. The car fitted with a 1.0 litre petrol engine and has 5+1 gear box had initially graced the roads of Netherlands and Denmark. Maruti has bagged the order from Nissan to make and export 30,000 Pixos (which is scalable) in the current financial year and a special vessel, Euro Spirit, will ferry the consignment.

Maruti Suzuki plans to export one lakh units of A-Star, of which 30,000 are under contract with Nissan, 60,000 will be sold as Alto by Maruti itself and 10,000 by Suzuki in Latin America, Algeria, Australia and some rich African counties. Just like the A-star, Nissan Pixo is being solely manufactured at Maruti’s state-of-the-art facility at Manesar near Gurgaon in Haryana.

Maruti is concerned over sales growth coming mainly from the Dzire and Swift.  Unless its other products contribute equally Maruti could face problems in the long-term. The Maruti SX4 hasn’t been doing well of late, maybe due to the new Honda City and the Fiat Linea. The WagonR and A-Star are having tough competition from the Hyundai i10.

“My concern is about the quality of our growth. Although we achieved good overall national numbers, the region-wise and model-wise performance was not uniform. We relied mostly on Dzire and Swift to power our growth,” Maruti Suzuki India MD and CEO Shinzo Nakanishi said. The company’s performance in many other models was not upto the mark, he added.

“The wide range of models and our national presence are competitive advantages for us. We have to take full benefit of these competitive advantages and focus on all models and all regions. Without improvement in these areas, we may be able to grow for one or two years, but we will face a problem in the long term,” Nakanishi said.

Maruti Suzuki is going to refresh its entire existing portfolio of older models in the next two years. Swift, the largest selling premium hatchback in the country, will get a fresh design and new petrol engine while Maruti’s largest selling product Alto will come in two new variants. As posted earlier, Alto will have a stripped down version to compete with the Tata Nano and an upmarket variant loaded with the new KB series engine to take on Hyundai Santro, GM’s Spark and other compact cars in the market.

Maruti’s other cars, the ageing WagonR and the Versa are also being overhauled while the company will tweak the engines of 25-year old Maruti 800 and the Omni to meet the new BS4 emission standards coming in April 2010. The sports utility vehicle Grand Vitara will also don a new engine.

By refreshing the portfolio Maruti will save on huge incremental costs that goes into developing new cars and platforms. As against the minimum cost of Rs 50-100 crore for upgrading a car, developing a new car could eat up investments of Rs 600-1,000 crore. Maruti may also bring the Kizashi to India sometime next year. Developed by its Japanese parent Suzuki Motor Corp, it will compete with the likes of Honda Civic, Toyota Corolla and Hyundai Elantra.

Maruti Suzuki has not yet taken a call on phasing out its successful cars 800 and Omni. Earlier there have been reports that Maruti would phase out 800 and Omni by 2015. However, Maruti is now working on upgrading the 800 and Omni to meet Bharat Stage 4 emission norms, which will come into effect from 2010.

“We have not yet taken a call on phasing out 800 and Omni. The decision to phase out the models or not will be taken by our marketing division,” Maruti Suzuki Managing Executive Officer I V Rao said. “Our marketing team has asked us to upgrade the 800 and Omni to meet he 2010 emission norms. We are going ahead with it,” he added.

Maruti Suzuki is working on an ambitious plan to roll out electric cars and compressed natural gas (CNG) variants for 3 or 4 models in India which may take upto five years. The plan is part of Maruti’s broad strategy to develop small cars that run on alternative fuel technology and thus save on fuel cost and be more environmental friendly.

The company is working on multi-fuel variants and some models have been identified for CNG. A CNG kit currently costs over Rs. 40,000 and that is expensive. Also, these cars can only be launched in 2010 or 2011, when there is a pan-India CNG filling system from companies like Reliance. It is learnt that the R&D unit in Japan is currently facing two key challenges in developing electric cars for India mileage per charge and price.