For the longest time, the joke in India was you could buy any car as long as it was an Ambassador. The old warhorse ruled the roads for decades with a status so iconic it couldn't be shaken by anything; certainly not the only competition at the time, the Premier Padmini. Until 1983. That's when a new icon was born: the boxy little Maruti 800 that knocked the Amby off the charts and went on to capture the imagination of an entire generation of middle class Indians. The car was tiny and lacked power, but in the days of socialist-era deprivation, it was the most coveted consumer product in the country.

More than three decades on, the once bestselling Maruti 800— which derived its name from the son of the wind god in Hindu mythology—has been retired, spelling the end of an era in India’s automobile history. But its manufacturer, Maruti Suzuki India, still remains the country’s largest selling carmaker: It has sold more than 20 million cars in India over the past three decades and in 2017-18, it accounted for one in every two cars sold in the country. “Suzuki is a small car specialist and coupled with that it has concentrated on the Indian market. This is more than one can say for any other global automotive major. Neither are they small car specialists nor have they concentrated on the Indian market. The end result is what you see,” R.C. Bhargava, the 85-year-old chairman of Maruti Suzuki India, a subsidiary of Japan’s Suzuki Motor Corporation, tells Fortune India.

It might have begun as a small carmaker, but if Maruti Suzuki remains ahead in the race today, it’s largely because of the company’s decision to switch gears and expand its portfolio beyond hatchbacks to mid-sized sedans and even sports utility vehicles (SUVs) some years ago. To be clear, it didn’t abandon its core bread-and-butter market and continued to roll out a range of cheap small cars like the bestselling Alto and WagonR priced under ₹5 lakh. In fact, one of its biggest launches in 2005 was the Swift, a more modern-looking hatchback. But slowly it also launched cars like the premium hatchback Baleno and full-size sedan, the Ciaz, priced between ₹8 lakh and ₹10 lakh. The ultimate goal? To retain its 50% market share in India where the passenger vehicles market is expected to touch 10 million a year by 2030. “Nobody wants to lose market share. We don’t either,” says Bhargava, whose name is almost synonymous with the carmaker.

Kenichi Ayukawa, MD and CEO, Maruti Suzuki.      
Kenichi Ayukawa, MD and CEO, Maruti Suzuki.     
Image : Narendra Bisht

The move was probably a gamble. After all, Maruti Suzuki was always associated with functional, no-frills cars. Nobody ever thought of it as a maker of upmarket feature-packed cars. But it didn’t have a choice: Competition was roaring at its heels and, worse, some global carmakers such as Hyundai and Honda were attacking its core market—customers seeking cars priced less than ₹10 lakh. For a brief while, it seemed like Maruti was losing its grip on the market as smaller cars like the Hyundai Eon, Honda Brio, and Hyundai i20 barged into its lane. Millennials, one of the country’s key markets, were turning to newer and hipper brands like Hyundai, Honda, Ford, and Renault. And for the first time Maruti Suzuki’s market share in the passenger vehicle segment slipped below 40% in 2011-12 and 2012-13.

Today, despite increasing competition, Maruti Suzuki’s financial health suggests the strategy has paid off. It has a market capitalisation of more than ₹2 lakh crore and accounted for 1.62 million of total 3.28 million passenger vehicle sales last year. It reported a record annual profit of ₹7,721.8 crore in 2017-18, which was 5.1% higher than ₹7,350.2 crore the previous year. Net sales were also up 16.7% in 2017-18 to ₹78,104 crore from ₹66,909.4 crore the previous year. Bhargava says the company is on course to cross the ₹1 lakh crore revenue mark in the next three years.

So, what is Maruti Suzuki’s secret recipe? Kenichi Ayukawa, the straight-talking Japanese executive from Suzuki Motor Corp who leads Maruti Suzuki as managing director and CEO, doesn’t feed the popular narrative of technological superiority most carmakers try to spin. Instead, he explains, it is the ability to do the simple things right that has delivered the goods for Maruti Suzuki. “We have focussed on the customers and providing what they want for the last 35 years. Even in the future, that is something we have to continue to focus on. Maruti Suzuki’s mission to provide Indian customers with good and affordable products will continue. As far as India is here, we will be here,” says Ayukawa.

Pricing has always been key to Maruti Suzuki’s strategy. It has always had an edge over the competition because its cars are affordable for the masses. Even with its more recent products like the Baleno and Ciaz, the company has always managed to undercut the competition. So, you have to fork out between ₹5 lakh and ₹8 lakh for the Baleno, which is less than the Jazz, its competitor from Honda, which only starts at ₹7.29 lakh. Similarly, the Ciaz is priced between ₹8.19 lakh and ₹10.97 lakh, nearly ₹80,000 less than its rival, the Honda City, which starts at ₹8.97 lakh. The question is: Will Maruti Suzuki retain its pricing edge with rising commodity prices and a higher goods and services tax? The answer to that is yes because its operating margins of 15.12% in 2017-18 give it headroom to cut prices if necessary.

 R C Bhargava, Chairman, Maruti Suzuki      
R C Bhargava, Chairman, Maruti Suzuki     
Image : Sanjay Rawat

However, its ability to undercut the competition in terms of pricing was put through the wringer when it decided to enter the SUV market. A late entrant into the segment, Maruti Suzuki had some formidable competitors: The Renault Duster launched in 2012 had already made the SUV, an aspirational product for Indians, affordable and easy to own. Ford upped the stakes a year later with the EcoSport, a smart compact SUV built to international standards but at a starting price of just ₹5.59 lakh. Suzuki Motor Corp did not have a product in its portfolio that Maruti Suzuki could simply replicate in India to take on the EcoSport. This was where the Gurugram factory’s design centre, where some of the most challenging design and engineering work for future Maruti Suzuki products takes place, came in. The Vitara Brezza, a compact SUV and the first vehicle Maruti Suzuki developed from the ground up, was born at this centre.

The story of the Vitara Brezza goes back to 2012. The brief for C.V. Raman, senior executive director (engineering) at Maruti Suzuki India and the lead engineer on the Vitara Brezza, was to develop a sub-four metre compact SUV at less than ₹7 lakh with a diesel engine. He recalls that hundreds of doodles were made but eventually the marketing team decided on the upright SUV design. And the product was developed in just three years for rollout at the Auto Expo in February 2016. “We were very sure that the compact SUV market was going to grow. We saw a tendency in the market that people wanted to shift to an SUV that is affordable,” says Raman. The Brezza, priced a few thousand rupees below the EcoSport, is already the country’s bestselling compact SUV and crossed the 330,000 units sales figure less than two-and-a-half years after its launch in 2016. There’s still a long waiting list for the Brezza.

It could have gone either way. Maruti Suzuki had already burnt its fingers once in 2011 when it tried to enter the luxury segment with the Kizashi priced between ₹16 lakh and ₹17.5 lakh. The car was brought in as a completely built unit (CBU), or a 100% import, but poor sales forced the company to discontinue the product in less than two years. “The price-value equation was not fitting. Since it was a CBU, the duty structure meant that the price was very high which the customers did not accept. We are into a mass market and we cannot enter the niche luxury market with a sudden jump,” says R.S. Kalsi, senior executive director (marketing & sales).

Over the long term, the super-quick development of the Vitara Brezza will help the company reduce product development timelines further. “The pressures on product development timelines from the customer end will be there and will keep increasing. But because of the work that we did on the Vitara Brezza, we feel that our capability to develop products for India or for Suzuki globally, has taken a big leap forward,” Raman says. It is something even the competition has realised. “Product development cycles will have to come down from the four years at present. We will have to react much quicker to regulatory and customer changes and requirements,” Pawan Goenka, managing director of Mahindra & Mahindra, said at an Automobile Component Manufacturers Association annual meeting.

What could crank up the pressure on Raman’s team is that India is already Suzuki Motor Corp’s largest market and the next logical step is products developed in India for the global market. “India is the most promising market in the Suzuki group in terms of growth. Its importance will keep growing. We [Maruti Suzuki] ourselves will have to develop products not just for India but also for the group,” says Ayukawa.

But the speed of development isn’t everything. Design is just as important. And Maruti Suzuki realises that. Can the company break the general perception that it’s just a maker of downmarket value-for-money cars? It’s certainly trying. Over the years, it has worked to shed the image of being a maker of old-fashioned cars to one producing edgy designs that appeal to today’s customers. Today, Maruti Suzuki offers a range of customisation options and its products are packed with gizmos such as touchscreen infotainment systems, automatic climate control, LED headlamps, and other bells and whistles. “The image of a customer in 2014 and the image of a customer in 2018 is very different. Right from the kind of clothes they wear to the colours that they like, it is all changing,” says Raman.

Kalsi, a 30-year veteran at the company, has the unenviable task of targeting new buyers for the carmaker’s ever-growing list of models. “We see it as a luxury of choice that we are providing to the customer. In the price ladder, there is an overlap among the various models. But India is a diverse country and the tastes of the customers are diverse,” he says.

In a bid to reach out to today’s picky customers, Maruti Suzuki has also pumped up its marketing, distribution, and sales efforts. For decades, its dealership network was largely stagnant, but over the past five years it has been pushing its premium product branding through the more exclusive NEXA showrooms with trained staff picked from the hospitality industry. “NEXA was envisioned around five years ago. It was a time when we had already been in the market for 30-odd years. Based on our market research, we found that there was a category of customers who didn’t consider Maruti Suzuki in their thought process at all. It was mainly the kind of millennials who are used to pampering and hospitality in all walks of life,” says Kalsi.

The experiment has been a success: If NEXA sales are taken separately, it will be the third largest behind the rest of Maruti Suzuki and Hyundai. The company is now trying to replicate the success of NEXA by rebranding its other dealerships under the Maruti Suzuki Arena moniker and revamping the Maruti Suzuki True Value dealerships for used cars. “Indian customers are evolving and they are coming in with different expectations. We have to cater to those expectations,” says Ayukawa.

As the market expands, Maruti Suzuki’s production efficiency will be tested to the limit. The company produced 1.62 million units in 2017-18 against an installed capacity of 1.56 million. With the production line at Suzuki Motor Corp’s Gujarat plant expected to be commissioned by early 2019, the capacity will go up to 2 million and by 2025 the company says it is on track to produce 3 million annually. “To get to 5 million cars annually, we would need one more plant which produces 1.5-1.6 million units annually. But putting up a plant is not a challenge. Both Maruti Suzuki and Suzuki Motor Corporation have enough resources,” says Bhargava.

It’s a long way from the time the Gurugram plant was inaugurated by the late Sanjay Gandhi over 40 years ago when his mother and then Prime Minister Indira Gandhi allowed him to chase his dream of creating an indigenous ‘people’s car’. The plant was then owned by Maruti Motors, but the project was riddled with so much political nepotism that if it happened today most prime-time anchors would be out of breath screaming scam. By the time Sanjay Gandhi died in 1980, India was no closer to building its own people’s car than it was a decade earlier when his vision had the backing of the government. Maruti Motors was nationalised in 1980, its name changed to Maruti Udyog, and the hunt was on for a foreign partner to put an affordable small car on the roads by December 1983.

For nearly two years, there were meetings and discussions with the who’s who of global automotive majors. Volkswagen, Toyota, Mitsubishi, and Daihatsu were all in the running, but none of them believed in the potential of the Indian market enough to commit to what could be a tricky partnership with a public sector undertaking. With the clock ticking on the December 1983 deadline, Maruti’s luck was about to change. In March 1982, Maruti Udyog found the ideal partner in Suzuki Motor Corp and within a month, the then president of the Japanese firm, Osamu Suzuki, arrived in India to sign on the dotted line. Suzuki held a 26% stake at the time with an investment of $22 million, or roughly ₹21.2 crore according to prevailing exchange rates. The government later sold its stake to financial institutions and gave majority control to Suzuki in 2002. The Japanese firm has since increased its stake to 56.13% and has plans to invest ₹20,000 crore over the next three years.

In his 2013 book, The Maruti Story: How a Public Sector Company Put India on Wheels, Bhargava explains how Suzuki Motor Corp and Maruti Udyog finalised all agreements only by October 1982, leaving them just 14 months to roll out the Maruti 800. The partners managed to meet the deadline. On December 14, 1983, Indira Gandhi handed over the keys to its first customer, an Indian Airlines employee, in a much publicised event. The car was priced at ₹52,500.

Nearly 35 years down the road, the stable of cars might have increased, but Suzuki’s Japanese DNA still keeps the factories humming efficiently. Maruti Suzuki’s Gurugram and Manesar factories produce around 6,200 cars a day, each with around 20,000 parts—or nearly 124 million parts going in and out of the two plants. Numbers like that scream logistical nightmares, but Maruti Suzuki’s internal information technology team developed a system called e-Nagare which helps operate on a zero inventory system. Rajiv Gandhi, senior executive director (production) at Maruti Suzuki, says the system intimates its vendors about the kinds of parts required. “This has helped us reduce inventories to a 0.7-0.8 day inventory,” he says. He adds that the inventory used to be 15-20 days earlier.

It hasn’t always been a smooth ride. Labour unrest at the Manesar plant around six years ago disrupted production for months and the company’s image took a beating. Given its history of labour union troubles, Maruti Suzuki has also been forced to find ways of increasing automation at its production facilities. The company has deployed more than 2,000 robots on the shopfloor at the Manesar factory, mostly for welding. “As far as we are concerned, we have some basic areas where we always go in for automation. Number one is quality, so if quality demands it then we use automation. For example, welding is completely automated. Also dangerous and difficult jobs are always automated,” says Gandhi.

Maruti Suzuki plant at Gurugram.      
Maruti Suzuki plant at Gurugram.     
Image : Narendra Bisht

At the same time, to ensure robots do not replace humans, Maruti Suzuki is also focussing on training. A.K. Tomer, executive director (corporate planning), says the upskilling of workers takes place at the Maruti Suzuki Training Academy: “We select people three-four years in advance to train the people on the assembly lines for the kind of new technologies that will be introduced in our products.” But the road ahead isn’t without speed bumps. Sustainable mobility is one of the biggest challenges. With more stringent emission norms, Maruti Suzuki will have to find new ways to improve the fuel efficiency of its petrol- and diesel-run cars and simultaneously find solutions to run the cars on cleaner fuels as well as gradually shift towards electric cars. “Meeting up with demand consistent with sustainable mobility is the challenge for us. That is the challenge for us, otherwise life would be very easy,” says Bhargava. “Business as usual will not do anymore. The primary reason for this is that the price of imported crude will become unsustainable. Fuel-efficient technologies or electrification is not about pollution as such. It is a by-product of what would happen. As an automobile manufacturer, I have to realise that if I have to keep doing business and grow, I have to find ways to sustainable solutions.”

Bhargava adds the solutions will have to be tailor-made for India and electric mobility is not the only answer. He suggests solutions like methanol, ethanol in the medium-term, and CNG (compressed natural gas) in the short-term as options. Maruti Suzuki is already the largest producer of factory-fitted CNG cars and according to its top management it is researching technologies on increased methanol and ethanol usage in its cars. His scepticism for electric vehicles stems from charging infrastructure constraints in India and the challenge of costs.

Analysts agree. “The technology which will drive the auto industry’s future will be the one which leads to lesser pollution and usage of green energy to whatever extent possible. This would mean lithium-ion, or any other alternatives like methanol, ethanol will be the future,” says Sridhar V, partner at Grant Thornton. Rakesh Batra, partner and national leader (automotive) at EY, says electric mobility and CNG will have a big impact on automobile manufacturers: “CNG could have an impact because that is something that already exists within India and the government is thinking they’ll finally do something to expand the reach of CNG.”

Not that Maruti Suzuki doesn’t have EV plans. It is starting trial runs of electric vehicles in collaboration with Toyota Motor Corp, a partnership that Bhargava says will help Suzuki and Maruti Suzuki get access to better technology, especially for electric cars. By 2020, it will also launch its first electric vehicle in India. How it manages to make the electric vehicle affordable will be one of the biggest challenges in the company’s 35-year history.

Experts are optimistic. “Maruti has a very good understanding of the consumer needs and being able to design products that fulfil those needs” says another consultant at a global audit and consultancy firm. “Customers don’t buy government policies, they buy products. That is where Maruti Suzuki will have an advantage, because of their deep understanding of the customer.” There’s no better testament to that than the fact that the Maruti 800’s first owner drove the car all his life and never upgraded. So, ultimately the choice of what powers Maruti Suzuki—whether it is electricity or alternative fuels—is a decision buyers need to make. The company has no option but to listen to the customer to remain No. 1, or as the Japanese say, ichiban.

The story was originally published in the October 2018 issue of the magazine

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