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Why Maruti Suzuki is Losing its Market Share?

Why Maruti Suzuki is Losing its Market Share?

Published on 19 August 2021 Views 51 Comments 0

The Market leader in Passenger Vehicles Segment in India- Maruti Suzuki seems to be losing its market share. What are the key reasons and what should an investor do? Get insight on both aspects in this short blog.

Introduction:

Maruti Suzuki, the leading passenger vehicle company in India is witnessing a fall in its market share. The current Retail Market Share of the company is around 40% as of June 2021.

Fall in Market Share:

  • Maruti Suzuki's market share in passenger vehicles was around 46% at the end of March 2021 which has now dropped to 40% in June 2021.
  • The company has lost a notable 6% market share in just a single quarter.
  • Talking about the last 1-1.5 years, the market share of Maruti Suzuki was around 52% which has now fallen effectively by 12% in 24 months.
  • The company is still a market leader but is consistently losing its market share to other players.

Reasons:

i) Creation of Aspirational Demand:

  • India is currently witnessing the rising Aspirational demand wherein there is a shift towards SUVs in the passenger vehicle segment.
  • Here, the product line of Maruti Suzuki doesn’t seem to fulfil the public demand for SUVs.
  • The 2 Successful SUVs of Maruti Suzuki- Brezza and Ertiga where Brezza was at the number 1 position, has not lost their leading position.
  • In this factor, competitive models like Creta, Nexon, etc. are gaining traction in the market.
  • To counter this problem, a company should come up with a strong comeback which lacks in the case of Maruti Suzuki as of now.

ii) Step towards EVs:

  • In terms of Electric Vehicles, the early mover advantage by Tata Motors is benefiting the company a lot.
  • Here, being the market leader, Maruti Suzuki has not taken any aggressive steps towards EV platforms which resulted in a fall in market share which may continue in the coming period as well.

iii) Safety View:

  • From the past few years, there have been rising concerns regarding the safety, strength, and other various factors of the vehicles of Maruti Suzuki.
  • The company is fulfilling the minimum parameters as per the regulation but is lacking behind in the case of the additional facility regarding safety, etc.

iv) Rising Raw Material Prices:

  • The rising raw material prices may certainly impact the margins and the profitability of the business.
  • And, to avoid inflationary pressure of input cost, the company needs to take pricing action where Maruti Suzuki possesses a competitive advantage. But after this developing scenario, where the company is losing its market share, it may also lose its competitive advantage overpricing.

Conclusion:

The above-discussed reasons are the key reasons for the loss of market share of Maruti Suzuki where the company seems to be lag behind. The current situation doesn’t seem to be good for the company and the shareholders as well. Also, from the current point of view, the company doesn’t look well from a long-term perspective. One should check on its side too and should consult his/her financial advisor before making any investment decision in the stock.

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