Speed Breakers Galore - Maruti

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The Industry Strikes Back Contd...

A Business India report⁵ pointed, "No one is better equipped to fight a price war than Maruti. Its phenomenal profitability, cash reserves, and efficiency in manufacturing will allow it to slash prices on all its models without feeling the pinch as much as the others." However, Hyundai was the first company to introduce what came to be known as, pricing based on customer's value perceptions. It introduced the base model of Santro at Rs 2.89 lakh, while two other versions were priced at Rs 3.49 and Rs 3.69 lakh. The basic version was targeted at buyers of the 800, and the other at the Zen.

Thereafter, launches in the Rs 2 lakh-Rs 6 lakh segment by Ford and Hyundai showed highly innovative pricing strategies being adopted. Soon after, Ind Auto dropped the price of the Fiat Uno Diesel by Rs 64,867 and Premier Automobiles Ltd. (PAL) lowered the prices of the 4 versions of the Premier Padmini by Rs 5,000 - Rs 53,000. MUL had adopted a skimming strategy for the Esteem. Launched in 1993, it was positioned as a luxury car. This continued till the arrival of Daewoo's Cielo in 1996, which started eating into Esteem's share. In 1999, the segment saw the arrival of Fiat Siena, Opel Corsa, Ford Ikon and the Hyundai Accent. MUL resorted to price slashing and brought the prices down. While the top-end version's price was reduced to Rs 5.25 lakh from Rs 5.91 lakh, the base version was brought down to Rs 4.42 lakh from Rs 4.67 lakh. However, this was possible only because it enjoyed substantial margins over costs, being the first-mover in the market.

MUL also followed the same modus operandi for Zen, albeit in a different manner. The company increased the number of Zen variants to 10, with prices ranging from Rs 3.00 lakh to Rs 4.30 lakh. The price stood reduced for the Rs 3.00 lakh variant in terms of stripping down the model's features.

The competition responded with similar moves. Daewoo offered price-variants for Matiz, Ind Auto offered 7 variants of Fiat Uno, ranging from Rs 2.77 lakh to Rs 4.17 lakh; Hyundai's Santro offered 6 variants between Rs 2.99 lakh and Rs 3.74 lakh; Telco's Indica came in the range of Rs 2.56 lakh to Rs 3.88 lakh with 4 models.

N.K.Goila, VP, Honda- Siel Cars', aptly summed up the situation, "It is important to be present with grade-variation and a range to cover the range of potential customers being targeted." The price-points in the car market were replaced by price-bands. The width of a price-band was a function of the size of the segment being targeted besides the intensity of competition. The thumb rule being 'the higher the intensity, the wider the price-band.'

Ford's research, before the launch of the Ikon, a car made for the Indian market, revealed that over the previous two-three years, the 800 segment had graduated to the next level of the Zen, Santro, Matiz, Uno and Indica. Ford's research on the existing market segments and the consumer response to new cars revealed that beyond the Zen segment, the choice for the consumer was limited.

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5] 5^th October 1998.

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