Maruti Suzuki - Leader in Passenger Vehicles

I have Maruti stocks, and would obv want the company to survive and grow as well, but sharing an article on how quickly sometimes car OEMs can die… not to be perceived as any view from my side, but thought to share this article for everyone’s reference

You are right. And in tough times likes these our conviction goes down drastically.

Although, I believe this transition phase will be over soon and Maruti has good management that will help the company to sail the way through.

Most defunct cars mentioned above were due to step motherly treatment. Imagine Toyota buying Suzuki and making it secondary. Some companies do it purposely like HP did to Compaq.

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I have this strong view that rules of the game will change post EV transition and entry barrier to the auto business will be broken . Today of the major knowhow and point of difference between auto manufactures in the technical expertise in engine area. That know how will count for zero in EV world as motor tech is the same as commonly used in fans. None of the auto companies have expertise in this area and other main component is battery where also none of the auto companies have expertise. I have this strong feeling that differentiating factor between time to come will be software and not the hardware … cool tech like auto driving etc will be deciding factor for buyers. Margins should come down because entry barriers would come down and legacy auto makers might face some pressure because they have certain existing cost structures. Like for example China has 500 startup’s for EVs and even in India there are so many startup’s for 2 wheeler EV. These many startup’s might result into hyper competition like the one we saw in telecom. I may be wrong , but I have been studying some what on this issue and have formed this opinion until now which is still forming.

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I have a different view, Unless the charging infra picks up and costs are viable, till then EV’s coming into main stream will take time. Hybrid is the way to go and Maruti has taken lead in this category by sourcing tech from Toyota and also tieing up with them.

Toyota has sold 10M Hybrid Variants in 2017, the scale indicates the maturity of the tech and also acceptance across the globe. So there would be intermediate stage of Hybrid for a decade in combination of EV before getting into main stream EV. I don’t think writing off Maruti so early is a good idea atleast the street seems not convinced with that yet. Most of the time, the early innovators fail but the top class executors win. Maruti can build partnerships, scale easily and also have very good execution capability.

Regarding the tech update of the software platforms in the car, it would be commodity and eventually every car manufacturer would have it mostly sourced from the expert at a price.

Disclaimer: Out of Maruti during life time highs and have only tracking position for now.

Check out the Audi e-tron review, I feel decoding EV with much simplification is a possibility but innovation keeps happening.


Agree completely that without charging infra and cost coming down EVs don’t stand much chance. However this statement is true for cars and not as much for 2 wheelers , 3 wheelers and buses.

Govt is focusing on 2 wheelers and public transport first. As of now 2 wheelers have range of >100 km and this is sufficient for majority if one charge only at home . This range is bound to increase I. Years to come . govt is talking care of cost part by subsidy and this subsidy is only going to increase in form of tax on petrol ones. Reducing Battery price will mean that after 2025 2W EVs will become mainstream without subsidy. (There are studies which point towards this) . Public transport bus, auto will also be promoted on EV and charging infra will be created by 2025 because of demand for 2 wheeler charging as well. Subsidy on Bus and auto will Not be needed because demand will be there on non subsidised prices as operational cost are low.

I am assuming here that battery prices will continue path to lower prices and reduce by >30% in next 4 years also govt focus will continue on EVs because of pollution and economic benefit they bring.

EV In 4 wheelers will see meaningful start after this time which may not happen before 2025 . Studies suggest that before transition happens , sales of gas EVs will start going down as people will wait to buy EV instead of buying gas vehicle

Maruti will defiantly have a good start in EVs , but things might change . We all love Maruti for engines and fuel economy . These things won’t be the differentiating factor anymore for them. For ex , Tata are not a main player as of now as Tata petrol engine is not top of the time … however Tata might stand good chance if EVs become mainstream because of their expertise from JLR and also because Tata technologies and already helping Chinese EV car makers to build EVs. Tata chemicals is setting up LI battery plants so they have all they need to become major players in EVs. So there might be lot of changes which are difficult to predict now .

We need to be cautious with so many uncertainties in future , that’s what my view is for now. Let the story take shape and then create a longer term view.

This may not be the only reason why Maruti is able to sell. Maruti is top diesel sedan OEM but they don’t know how to make a diesel engine (until recently). The fuel efficiency is not only in the engine. If you take the Suzuki petrol engine and port it to say a Tata Indica, it may offer poor economy due to the sheer weight of car.
Maruti sells because

  1. They have wide distribution and Marketing / sales network.
  2. They have unified parts across cars (think of a power windows switch shared between a Celerio to Ciaz) and also sharing platform.
  3. Lowest cost of operation due to market share and above cost advantages.
    4)Suzuki has lost market in US, China, and now in Europe. So they have a focus for India while competition does not consider India as top priority. Home grown OEMs have issues of their own.

Quality and reliability has improved but every OEM can match their quality. Those are not the tough part and Suzuki does not need to make the most efficient engine to stay on top. However they need to create such a thought process in consumers to stay as No1 OEM. It’s all about marketing.

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Excellent interview.

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What I am able to understand from recent discussions is that EVs will provide a level playing field to all the auto manufacturers once again.

Well, in terms of manufacturing this may well be true but then what about the reach, availability of spare parts and range of the car. Currently, we love Maruti because it is cheap and spare parts are available everywhere. That wide distribution network will effectively play out for Maruti and give it a good advantage.

Although it will be extremely important for them to keep their costs low as they have done with ICE.

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Its different with EVs. They have only 20 moving parts instead of 200 in ICE cars. That translates into less maintenance and less spare parts to be replaced. In fact cost of replacing entire motor will be much small portion of the cars value, in today’s world we can’t think of replacing engine. Battery is single most expensive replacement for EVs.

Distribution wise EVs would mostly Ben marketed as sold online and direct outlets as there is none to very less periodic maintenance needed .

But with all this , Electric cars will take lot of time to become mainstream and will be last to convert to EVs after 3 wheeler, 2 wheeler , taxi and buses.

A few more global perspectives. To me, the golden age of owning and maintaining personal cars seems to be over. I may be wrong but that is just my opinion.

Finally our own man Rahul Bajaj puts it in no uncertain terms that most manufacturers in India sell substandard cars and most of the cars under 10 L will not sell in any developed nations.

Top 10 auto stocks fall 21% in 6 months

With little clarity on the demand outlook, investors should wait out the next couple of quarters rather than rush in to catch a falling knife, says Ram Prasad Sahu.

Finally this has happened. I have been saying this for a few years once Maruti came out of VW alliance and started cooperating with Toyota.

Bottom line:
Daihatsu will not come to India,
Toyota is safe with regards to CAFE,
Suzuki will get new electric drivetrains,
More badge engineering,
Maruti reduced to marketing and India specific R&D while Suzuki/Toyota take care of manufacturing


having said that even after the long haul MS having problems recently they recalled cars
however this is done free of cost : Starting 24th August 2019 owners of the suspected vehicles will be contacted by Maruti Suzuki dealers for inspection and replacement of the faulty parts, free of cost.

They can transfer the technology but it will take some time to build inventory and replacing the old parts .It takes time for the vendors to change their product line .Capex will be required to change production lines . It may be not as costly as the new but still need CAPEX .
in lite of these facts one should be cautious about new entry in the scrip
Disc: i had invested in past but currently no holding

This is called vehicle recall and are done very often by all major OEMs. It has nothing to do with a company selling cars for a long time. OEMs get parts from suppliers and if found faulty, they will be replaced.

Maruti sales down by -36.1% in August.

Other companies:
Mahindra passenger vehicle sales declined by -32%.
Bajaj 2-wheeler domestic sales are down by -15%.

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it seems production cuts will stay or may increase further as companies will be preparing for April 1, 2020 when BS IV vehicle sales will stop, as ruled by Supreme Court of India.

Moreover going forward there will be lot of factors at play:

  • Tight regulations(BS VI norms + Safety Norms + Scrap Recycling policy burden on manufactures) these factors already effecting Cost, as mentioned by Maruti Chairman cost of vehicle to consumer is already up by 10%, and Indian Consumer are cost sensitive, hence sales may further slump or stay stagnant.

  • Connected Cars Trends: Ex: Hyundai Venue, MG Hector, Kia Seltos, young generation prefers new age tech rich cars, sales figures all these models are pointing at same, i think this trend is just starting, once a meaningful cars start having e-sims inbuilt, there is massive potential of apps & sensor based smart system can be developed, which will scale quickly(given the IT strength of Indian startup’s, all they need is vehicle manufactures to open their API’s for development), i think this segment will cost Maruti huge in next 3-5 years, unless they also come-up with better offering, as of now Maruti have no offerings in connected cars.

  • Heated competition with New Players: Chinese & Korean (MG, Kia) already entered Indian market and having very good start, and both these players are cost conscious, can easily dip into Maruti’s market share.

  • EV’s: this is another disruption which will happen in next 5-10 years.

  • Ola/Uber investment already peaked out.

  • Brand Fatigue: having 50% market share is truly a remarkable achievement, but going forward maintaining such a massive market share in the highly competitive market will be very hard, as usual everything peak out and brand fatigue slowly start effecting.

overall i think best days for Maruti are behind, and stock is still richly valued.

Disc: Exited small holding.

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