Why is Maruti Suzuki the KING of Indian Roads?

5 out of every 10 people in India own a car manufactured by Maruti Suzuki. Whenever someone has made a decision to buy a car, they check out for cars manufactured by MS. Even if they look out cars manufactured by other companies, there is a high chance that they will eventually buy a Maruti. This is because the advantages of owning a Maruti car are appreciably more when compared with other car manufacturers. 

Some of the advantages are:

1.     Better mileage

2.     After sales service

3.     Sales network

4.     Inexpensive cars

Clearly the above advantages have made MS cars the top-selling cars in India. 

Every car company in India wants their product to be the best-selling, so they deeply invest in their product(s) but they are not able to compete with Maruti. You might be thinking that they do not offer great mileage which MS does, that’s why they are not able sell as many units of their product as Maruti Suzuki. But the reason lies not only in mileage or after sales service etc., these are all the secondary advantages that are associated with Maruti.

The paramount advantage that makes Maruti the ‘king’ of Indian roads and why other brands are not able to face it, is what we are going to catch in this article.

Why the global car manufacturers wanted to enter India?

Many car manufacturers from around the world wanted to enter India to sell their cars. The reason behind this was that India had only 30 cars per 1000 people whereas US had 850 cars per 1000 people and the count in China was 200 cars per 1000 people. Car companies saw this as an opportunity, they had the idea that if there are a smaller number of cars per 1000 people in India then the growth rate in the sale of cars is going to be tremendous. 

But things did not go as per their planning, because the automobile sector in India did not grow as per their expectation. For the past 10 years the growth has been negligible, every year the auto industry grows only 3% - 4% which is a major setback for these companies.

The taxation of cars in India.

India has a distinctive law when it comes to levying taxes on cars. The taxation on cars is extremely high, which makes a car expensive.

There are three cases according to which we can understand how the taxes are levied on cars in India:

1st Case-

If a car has less than 1200cc petrol engine and the length of the car is less than 4m, then the tax on that car will be 29% (28% GST + 1% compensation cess).

For example- If the cost of a car is ?600,000 before taxes. After tax the cost of that car will be ?774,000 (?600,000 + 29%).

2nd Case-

If a car has less than 1200cc petrol engine and the length of the car is more than 4m, then the tax on that car will be 43% (28% GST + 15% compensation cess).

The ?600,000 car from the above example will now cost ?858,000 (?600,000 + 43%) after tax.

3rd Case-

If a car has a petrol engine of more than 1200cc, irrespective of the car length, then the tax on that car will be 50% (28% GST + 22% compensation cess).

The cost of the ?600,000 car after tax will now be ?900,000 (?600,000 + 50%).

The Paramount Advantage that outshines Maruti Suzuki.

India has always been an important market for MS. Therefore, their cars are designed keeping in mind the taxation laws in India. For instance, swift (one of the best-selling cars of Maruti) has a petrol engine of 1197cc and has a length of 3.8m. So, they get the benefit of less taxation on their cars which is why their cars are inexpensive when compared with other car brands. The inexpensive cars generate more sales and this means more cash flow for MS which leads to expansion of business.

Why other brands fail to battle with Maruti Suzuki?

Let’s say a car company wants to compete with swift, their car has a petrol engine of 1198cc but the length of the car is 4.5m. The cost of this car before tax is ?580,000. The tax on this car be 43% of ?580,000. Let’s assume that the cost of swift before tax is also ?580,000 but the tax on this car will be 29% of ?580,000, because the length of swift is less than 4m. Which means that people will be attracted to swift because that car is affordable plus they are getting all the other benefits of owning a Maruti. 

A solution to this problem for other car brands is they’ll have to design and manufacture a car from scratch keeping in mind the tax norms in India and then only they can compete with Maruti. But developing a car from the start is not at all an easy task. There are innumerable expenses that are associated with the manufacturing of a car. The cost of research and development, marketing costs, road test costs, crash test costs, production costs, after sales service costs etc. 

With such a colossal investment, even if they decide to develop a car of less than 1200cc petrol engine and less than 4m length, they need the assurance that their product is going to be a chart-topper, only then they will be able to cover all the costs related to that car. But with a yearly growth rate of less than 5% of the auto sector in India, their aspirations shattered into pieces.

For example- Datsun entered India in 2013 but due to several reasons they couldn’t survive and as a consequence they had to quit the Indian market.

You can read the full article regarding the exit of Datsun from India by clicking the image "It's a final goodbye for Datsun in India."

Today, Maruti Suzuki has become such a prominent brand that it is nearly impossible to break their record of sale of cars. Earlier, even MS was not a big brand in India, but slowly and gradually it expanded its operations, developed a great network of service centers, built showrooms etc., and now 1 out of every 2 people in India own a Maruti. Undoubtedly, it is the finest choice a middle-class can make while purchasing a car!