Indian Car War – Maruti launch Baleno

Maruti Udyog Limited (MUL) launched Baleno for the mid sized luxury segment in the Indian market. The company at one time had eighty five percent market share and almost no direct competitors. With liberalization and opening up of the economy, international car companies came to India and MUL found its market share coming down to sixty five percent. Introduction of Baleno and the proposed launch of Wagon R and Alto are part of the company's strategy to regain its fast eroding market share. Baleno with 1,600 cc engine at Rs 6.74 lakhs is positioned as a mid sized luxury car. It will compete with Opel Astra with price tag of Rs 6.77 to Rs 8.64 lakhs, Honda City Rs 7.57 lakhs, Mitsubishi Lancer Rs 7.22 lakhs and Ford Escort Rs 6.69 lakhs. The Euro II compliant Baleno has a 16 valve four cylinder aluminum engine that delivers 94 brake horse power. The car has multi point fuel injection system, power steering, power windows, central locking, air conditioning system and heater. Mileage claimed by the company is 12 km in city driving.

Maruti Udyog is a joint venture between Government of India and Suzuki Motor Company of Japan. In 1997 the partners were locked in a battle for control of the joint venture company and this made the Japanese partner go slow with the introduction of new models in the Indian market. With the BJP government coming to power, the relation between the partners improved. Now the company is keen to make up for the lost time and introduce new models to cover all segments of the market.

Wagon R will be launched in the second half of this month when the CEO of Suzuki Motor Company Mr Osamu Suzuki visits India. The CEO is expected to meet top government functionaries to discuss the future of the joint venture.

The company is investing Rs 1200 crore for introducing three new models. After Wagon R, in May 2000, two models of Alto - 800 cc and 1000 cc will be introduced. Wafer thin margins and additional investments are likely to have its effect on the profitability of the company. Company sources project 40 percent drop in profit for the year 1999-2000 despite increase in turnover from Rs 8474 crore to Rs 9000 crore. Fall in profit is even after increase in the price of various models in the last two months. The company is targeting sales of 400,000 units in 1999-2000.

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