Maruti Suzuki’s big SUV bet: Inside the auto giant’s strategy to reclaim 50% market share

When Suzuki Motor Corporation entered India in a joint venture with the government over four decades ago, nobody could have predicted that it would account for 40% of all cars sold in the country 40 years later. The Japanese company, known for its small and affordable cars, was a perfect partner for the government, which was looking to roll out a people’s car. After the Indian economy opened in 1991, Suzuki increased its stake in Maruti, which shed its public sector tag in 1992. It became a multinational in 2002 when Suzuki took majority control.

Cut to 2025. Maruti Suzuki is India’s top carmaker by volume. It sells more cars than the next three carmakers — Hyundai Motor India, Tata Motors and Mahindra & Mahindra — combined, and contributes 2.3% to India’s GST collections.

While the carmaker took over 40 years to reach a capacity of two million units, it has set an ambitious target of ramping up volumes to four million by FY31. “The first two million took 40 years. But in the next six-seven years, we would increase our capacity to four million,” Hisashi Takeuchi, managing director and CEO of Maruti Suzuki, tells Fortune India. Takeuchi, who worked closely with the late Osamu Suzuki, says the biggest lesson he learnt from Suzuki was to never give up.

Maruti Suzuki is setting up two greenfield plants, one in Haryana’s Kharkhoda and the other in Gujarat. It is planning a capex of ₹1.25 lakh crore till FY31, betting on low car penetration in India. “In India, there are 30 cars per 1,000 people. Japan, U.S. and Europe have more than 600 cars per 1,000 people. This means we have a big opportunity to grow the market. We are going to introduce a lot of new products in India,” says Takeuchi.

But it’s not just domestic sales that Maruti Suzuki is counting on. The carmaker is looking to export 20% volumes, eight lakh cars, by the time it hits the four million capacity milestone. In FY24, exports were 14% of sales. “We have about 40% share in car exports from India. This can be much higher,” says Takeuchi. Products popular in India can do well in the African market because of price competitiveness, says the Maruti Suzuki CEO.

Focus On SUVs

Maruti Suzuki, known for its hatchbacks, has been quick to hop on to the SUV bandwagon. It added several SUVs after the Covid-19 pandemic. “Our SUV segment share was 10-11% in FY22. We improved it to 21% in FY24,” says Takeuchi.

Not surprisingly, Maruti Suzuki’s first electric vehicle, the e VITARA, is also an SUV. Although the Japanese carmaker has been late to the EV race, it plans to leverage exports to become India’s top electric car manufacturer within a year. Suzuki Motor Corporation (SMC) has chosen India as the global manufacturing base for EVs. “From here, we will export to more than 100 countries,” SMC president Toshihiro Suzuki said in January.

On tepid response to EVs, Takeuchi says consumers still have some worries. “One reason is the charging network,” he says, adding Maruti Suzuki plans to establish an EV ecosystem to eliminate such concerns. “In top 100 cities, we have a showroom every 5-10 kilometres. We are thinking of setting up fast chargers at dealerships,” says Takeuchi. The problems around high upfront costs and residual value can be eliminated with battery-as-a-service, says Takeuchi.

The CEO of India’s biggest carmaker, however, believes the EV era cannot come in a day. “We have to use all technologies to reduce CO2. Multiple powertrains will reduce emissions and oil consumption. We will strongly pursue EVs but will do whatever we can on hybrids, ethanol and bio-CNG,” he says. The plan is to launch 10-11 models by FY31, including six EVs. The company expects every fourth car it sells to be hybrid by FY31. It also expects 15-20% sales to come from EVs. While passenger vehicle sales growth moderated to 4% in 2024, Takeuchi believes the industry will log a stronger 5-7% growth rate as household incomes go up. The growth will be led by SUVs. “While we have a high market share in small cars, we will introduce more SUVs. The additional new models will be SUVs. We will give only minor upgrades to small cars,” says Takeuchi.

Not that the carmaker is giving up on small cars. “People will still need small cars. We are following new regulations on safety and emissions at a much faster pace than the European countries, which means production cost is going up. Therefore, some first-time buyers are finding it difficult to buy small cars. Cost is increasing at a much faster pace than household incomes. Now, we don’t expect so many new regulations. The pace of cost increase is slowing down,” says Takeuchi.

As price hikes due to emission and safety norms put the brakes on sale of small cars, Maruti Suzuki, a late entrant to the SUV segment, quickly ramped up capacity for bigger vehicles. “If we didn’t grow in the above ₹10 lakh market, we would have been well below the 40% market share,” says Maruti Suzuki chairman R.C. Bhargava. In FY19, 80% cars sold in India were under ₹10 lakh. “Unless that lower end of the market grows, there will be no feeders into the upper end of the market,” he says, citing lack of affordability as the key reason for the decline in small car sales. “We need people to have more disposable incomes.”

As income levels go up, there will again be demand for small cars, says Takeuchi. The Maruti Suzuki CEO says the industry is seeing a shift from small cars to sub-compact SUVs. “We added a few products in the SUV range because we don’t have enough products. SUVs are growing faster than any other segment. So, our target is to introduce more SUVs,” he says.

One thing that separates Maruti Suzuki from other automakers is its omnipresence. “Proximity to customers is the reason 40% people choose a Maruti,” says Rahul Bharti, executive director of corporate affairs at Maruti Suzuki. Even before launching its first EV, Maruti introduced intensive training in about 100 ITIs (industrial training institutes). “The training of people who have to service the product started a year before the launch,” says Bharti.

Maruti not only built the automotive landscape in India but also birthed several component makers along the way. Its large volumes give it a pricing advantage in sourcing components.

However, the carmaker's future growth ambitions can't be met by domestic demand alone. "Given the vision of Prime Minister Narendra Modi’s Viksit Bharat (developed nation) programme, we realise that this ambition cannot be fulfilled by the domestic demand alone. India must take a larger share of the global market. The way to increase exports is more products and more geographies," says Bharti.

Even as it plays the volume game, Maruti Suzuki is upping the ante in the premium space with Nexa outlets. Sales through the company’s premium franchise are growing much faster in rural markets, says Partho Banerjee, senior executive officer, Marketing & Sales, Maruti Suzuki.

On EV plans, Banerjee says, “We are going to launch an ecosystem for EVs. Forty years back, when Maruti Suzuki started in India, we first built the infrastructure. It was easier to find a Maruti Suzuki workshop than a hotel. That was our strength. We feel the time has come to reinstate that confidence among customers again. Then only can EV sales go up,” he says.

One of the biggest lessons Maruti Suzuki learnt from the semiconductor shortage after the Covid-19 pandemic is deep localisation. That is why it plans to make battery cells in India. “We have always tried to localise everything needed to make cars. So, we would like to localise all the new components which are going to be used in EVs,” says Takeuchi. “The next era will not only be about making in India but also R&D in India. R&D spending in India is not strong enough compared to Europe, Japan and the U.S. We have about 2,600 engineers in R&D. We are going to increase this number to 3,200 by the end of 2025.”

SMC’s Suzuki is hopeful of reclaiming the 50% share in India's car market by grabbing the largest share of SUVs. “Our first priority is top market share in SUVs,” he says. Reminiscing his father’s foresight which led the Japanese automaker into India, Suzuki says no one could have visualised the potential of the Indian market 40 years ago. “Osamu Suzuki had full confidence in India and its people,” he says. No wonder India has become the biggest market for SMC with Maruti Suzuki and Suzuki Motorcycle India contributing over half to Suzuki’s passenger vehicle and two-wheeler volumes, respectively.