'Rural initiatives have contributed big to Maruti's growth'

Despite the slowdown in auto sales last year, leader Maruti Suzuki India Limited managed to grow marginally through innovative means, including a thrust on rural areas, where the company sold 32 per cent of its cars. Mayank Pareek, its Chief Operating Officer, Marketing and Sales, talks about the rural drive, the used car business, and the potential of cars with automatic transmission, in an interview with India Today's MG Arun. Edited excerpts:

Q. What specific customer services have helped you improve your sales, especially in challenging times?

A. To sustain leadership, we should ensure top-class service to the customer. He should be able to get service whenever he wants. We came out with the unique concept last year of Maruti Mobile Service. We created a workshop on wheels that would go to the homes of customers and address all their basic service needs. Last year, we did over 1,000 such workshops. We will double the number this year.
 
We keep a very close watch on the costs of servicing, which for us, comes to 15 to 20 per cent lower than competition. In India, almost 38 per cent people are first time buyers of cars. One reason why people don't buy cars is that they do not know how to drive.

In India, there are not enough driving schools, and the ones that are there, are not world class. Today, Maruti has 300 driving schools, and want to do 500 in the next two years. We based this on the models we studied in the UK and Singapore. Before the customer gets to drive the car, she is given training on a simulator, designed by ourselves keeping in mind Indian road conditions.

All these schools have lady instructors, since over 40 per cent of those who come to learn to drive are ladies, and over 20 per cent of them buy a car in the next three months. By teaching them to drive, giving them good service and providing financing options, we keep the customer for life. In India, a customer typically buys a car when she is around 31 or 32 years, and they change the car every seven to eight years. So that is the opportunity present before us.

Q. How has the rural thrust enabled Maruti to perform relatively better in an overall depressed market?

A. Last year, passenger car industry declined by six per cent. We marginally grew by 0.3 per cent, while our competitors declined by 10 per cent. We sold 10.5 lakh cars in the previous year, and a little more this year. Our rural initiative turned out to be very good. The rural markets have been growing, thanks to efforts to boost inclusive growth, higher minimum support prices for agriculture produce, and good monsoon in the past few years. Our rural programmes helped create demand in the rural market. Money is not as much a problem in the rural areas, as the lack of an urge to own cars.

We created films in local languages, on how a car can improve one's life. We created over 200 videos, that were shown in vans that travelled to rural areas across the country. Initially, they created curiosity, and a positive engagement starts. We created 7,800 resident dealer sales executives, who are locally placed, who develop a database of potential buyers. Also, rural folk cannot be made to pay equated monthly instalments like salaried people do, so we have come up with new ways of financing.

With all these efforts, rural markets grew by 16 per cent, despite the slowdown. Last year, 32 per cent of our total sales came from the rural areas, compared to 3.7 per cent in 2007. India has 650,000 villages, but cars are being sold only in 90,000. So, our journey has only begun.

Q. Is the availability of fuelling stations, good roads and connectivity an issue in the rural markets?

A. With the implementation of the Pradhan Mantri Gram Sadak Yojana and the golden quadrilaterals, no village is very far from the highways, which have petrol stations. Even in some villages, like those in Punjab, people keep diesel at home to operate tractors and generators. So, availability of fuel is not an issue in villages.

Q. Do customers in the rural areas go in for a different set of vehicles compared to the cities and towns?

A. Aspirations remain the same everywhere, so it is the same type of cars that sell in the villages too. Initially, we had thought we should we should develop a new car for these areas.  The largest rural demand is for Swift Alto, WagonR, and SX4. Ertiga, which we launched last year, is gaining ground now.

What if the monsoon turns out to be weak as predicted? What are the other plans in place?

A. Although the contribution of agriculture to GDP has come down, its contribution to sentiment is very high.  El Nino may come, but that may not affect the monsoon dramatically.

In addition to rural, we worked last year on car exchange programmes. We have sold around 12 million cars so far in exchange. Last year, our exchange business grew by 16 per cent. Through Maruti True Value, we buy used cars, refurbish it completely and sell. Last year, we sold 2.89 lakh of such cars. If our used car business was a company, it would be the fourth largest company in India. Our dream is to make this half a million in three years' time.

Recently, we launched the Celerio which uses automatic transmission (gearless) technology. For the first time ever, we are offering this technology at a price which is only Rs 39,000 more, while fuel efficiency and maintenance costs are the same as that of manual transmission. An example of affordable technology, this has redefined driving in India. Today, there is  a one-year waiting for automatic transmission cars. By 2020, every second car in India would have automatic transmission.  

Q. What about the refurbishing of existing models?

That is a continuous process, we did it in 2012 for Swift and Desire and Wagon R. We have three strategies for production - refurbish the existing cars. Then, we launch a new car in an existing segment.

We had Alto, we launched one more Alto K10, we had Swift, we launched Ritz, so that the customer gets more options. The third is, we create new segments. For instance, Ertiga is in a new segment, the mini all utility vehicle, which is big inside and small outside.
 At the Auto Expo, we showcased a bigger sedan called Ciaz, and the S-Cross, will bring to India.

Q. What impacts car buying the most? Is it higher interest rates that are a dampener?

A. The main issue is the sentiment, people are not sure about the future. But the latent demand is huge. Last year, 67 lakh enquires came in, although only ten lakh got converted into a purchase.