Case Study-NEXA

Maruti Suzuki India Limited, formerly known as Maruti Udyog Limited, is an automobile
manufacturer in India. It is a subsidiary of Japanese automobile and motorcycle
manufacturer Suzuki Motor Corporation. As of January 2017, it had a market share of 51% of
the Indian passenger car market. Maruti Suzuki manufactures and sells popular cars such as
the Ciaz, Ertiga, Alto, Swift, Celerio, Swift Dzire and Omni. The company is headquartered
at New Delhi.[2]

Maruti was established in February 1981, though the actual production commenced only in 1983.
It started with the Maruti 800, based on the Suzuki Alto kei car which at the time was the only
modern car available in India. Its only competitors were the Hindustan Ambassador and Premier
Padmini. Originally, 74% of the company was owned by the Indian government, and 26% by
Suzuki of Japan. As of May 2007, the government of India sold its complete share to Indian
financial institutions and no longer has any stake in Maruti Udyog.

Maruti Suzuki has inherently been a customer brand. Making a reputation in the budget friendly
segment so that it has the major market share of the segment. This image proved to be a
hindrance when Maruti tried to sell its more costly products like the Grand Vitara and the SX4.

To overcome this, Maruti created a separate line of Nexa showrooms which look and feel much
more premium than the regular showroom. This leads to a creation of a premium image.

NEXA

In 2015 Maruti Suzuki launched NEXA, a new dealership format for its premium cars.

Maruti currently sells the Baleno, S-Cross and Ignis through NEXA outlets. S-Cross was the first
car to be sold through NEXA outlets. Several new models will be added to both channels as part
of the Companys medium term goal of 2 million annual sales by 2020.
Maruti plans to drive sales via NEXA outlets
NEXA was born of the company's desire to come up with an offering for customers who wanted
an evolved retail experience
One in two passenger cars sold in the country for less than Rs 10-lakh are made by Maruti
Suzuki. Yet the subsidiary of Japanese Suzuki Motor Corporation has not been able to sink its
teeth into the premium car segment.

As Maruti Suzuki gears up to sell two million cars a year by 2020, it has a strategy to drive sales
of its premium cars. If the strategy works, at least 10 per cent of Maruti Suzuki's sales in the next
two years will come from its new chain of premium showrooms, NEXA.

The company intends to sell at least three models in NEXA showrooms in the next few months.
It has sold 10,000 sports utility vehicles S-Cross since the model's launch a little over two
months ago.

Maruti Suzuki plans to bring 15 new models into India in the next five years.

T Suzuki, president of Suzuki Motor Corporation, recently said at Frankfurt of the 20 models to
be launched by company, at least 15 would be for the Indian market.

"Maruti Suzuki is facing an onslaught from two segments. One, luxury car makers like Mercedes
and BMW are looking at bringing in entry-level cars to India. Two, multinational car makers like
Renault are aggressively trying to tap into the Indian small car market," said Abdul Majeed,
partner, PwC India and an automotive industry expert.

Maruti Suzuki needed to retain its customers who were upgrading to other Japanese or European
brands, he added.

Maruti Suzuki found that they dont have a premium lounge for their top end customers. For
them, a regular showroom with just a centralized AC and snacks would not do. They need a
luxury space in private away from the loud talks and laughter. So Maruti Suzuki went up and
launched Maruti Suzuki Nexa for this group of people who wish to own a premium car. And
another substantial difference is noted in terms of safety features, as vehicles sold from Nexa
outlets come standard with dual front airbags, along with ABS. On the flip side, cars retailed
from existing showrooms offer optional dual front airbags, while a few also get ABS with EBD.
Vitara Brezza that received optional dual end airbags with EBD was sold through regular
dealerships. So they will assume that a customer visiting a Nexa lounge, as rich, who want an
Indian car packed with aforementioned safety features than just gimmicks.

Maruti Suzuki found that they dont have a premium lounge for their top end customers. For
them, a regular showroom with just a centralized AC and snacks would not do. They need a
luxury space in private away from the loud talks and laughter. So Maruti Suzuki went up and
launched Maruti Suzuki Nexa for this group of people who wish to own a premium car. And
another substantial difference is noted in terms of safety features, as vehicles sold from Nexa
outlets come standard with dual front airbags, along with ABS. On the flip side, cars retailed
from existing showrooms offer optional dual front airbags, while a few also get ABS with EBD.
Vitara Brezza that received optional dual end airbags with EBD was sold through regular
dealerships. So they will assume that a customer visiting a Nexa lounge, as rich, who want an
Indian car packed with aforementioned safety features than just gimmicks.

WHY Maruti launched NEXA?

Maruti over the decades of its existence had been always associated as the Middle Class Indian's
car. Whenever they have tried to move a segment above and sell a luxury car they have failed
miserably. Numerous examples in history include, but not limited to, SX4, Grand Vitara, Kizashi
etc.

With NEXA they want to make sure that when someone who is willing to give 12-15 lakhs for a
car/suv steps into their showroom he isn't sitting next to a guy who is there to buy a 3 lakh alto.
Somehow in India people who buy luxury cars buy it also for the need to show the world that
they can afford it and such people will not be happy being served by a sales executive who wears
a worn shirt and speaks broken English.

With Nexa Maruti wishes to hit this targeted user group and is willing to do so at the risk of even
badging the cars without the Maruti name. Cars sold from Nexa outlets will only have the S logo.

What is a difference between maruti suzuki local showrooms and Nexa showrooms

Maruti Suzuki has been operating in India since 35 years approximately. Since its early stages it
has been conceived as a car for middle class Indian. Even today Maruti Suzuki commands a
market share of roughly around 35-40% with majority of its sales coming from small cars which
fall in the budget car segment.
Maruti Suzuki now wants to venture in the premium segment of hatchbacks, mid sized sedans
and small SUVs which are ruled by Hyundai, Honda and Volkswagen. But the major problem is
the image conscious customer of this segment who would not easily put down his money on a
Maruti as it is still percieved as a small car manufacturer. All the earlier attempts made by Maruti
to enter the upper segments were huge flops like The sedan baleno, The grand vitara SUV and
Kizashi which was a premium sedan.
Now to give its customers a rich and superior buying experience and to be a major player in
premium segment Maruti is trying to change the customer perception by offering NEXA
premium showrooms in which only only premium Maruti cars will be showcased. Maruti Suzuki
has aggressive plans for the premium segment and it has tasted success through Ciaz. NEXA
showrooms are only to give a premium buying experience to customers and to build the brand
image of Maruti Suzuki.
Hope this has answered your query.
The aim of Nexa dealerships is to maintain a premium feel and offer the customers a more
personal experience.

Exclusive dealerships that retail only the premium offerings from Maruti Suzuki such
as the S-Cross and Baleno. Future products could include the Ignis and Ciaz facelift
Fully trained relationship managers that cater all the needs of the customers.
The showrooms are equipped with iPads and Apple TVs in order to visualise every
aspect of the cars on sale.
Smartphone app to track service history, book servicing appointments, emergency
support, accessory purchase, etc.
Black and White monochromatic colour theme for NEXA dealerships
Dedicated delivery area inside the showroom. The customer drives his/her new car
right out of the showroom. Dealerships will also play your favourite music at the time
of delivery.

Will Maruti Suzuki's strategy of Nexa hamper its sales and benefit competitors like
Hyundai?

Maruti Suzuki's major advantage is the early mover advantage. They were the first to bring an
affordable, fuel efficient acr in India in 800 cc. One time they were having such a predominant
share in passenger cars. Even now, they have almost 50 percent of the market share. So they
have a critical mass, which no other manufacturer has, closely followed by Hyundai of course.
Maruti has a range of cars from entry level Alto 800 to premium cross over S-cross, costing from
2.5 lacs to 14.00 lac ( ex showroom) . So they can afford to experiment.
Having said that, I have to quickly accept that till recently Maruti is not known for packing
technology into the cars, which Hyundai has done very well.
World over it is known that luxury models are positioned differently in the market place with
seperate channels of distribution, differentiated pricing strategy and also a distinct brand name,
to identify with the premium segment. You will also agree, that as per 80: 20 principle, 80
percent of luxury cars sales should come from 20 percent of the centers. I think Maruti has done
correctly, not to spread its resources thru all centers B, C, D and focus only on A, as it has
embarked on differentiated channel of distribution. But one need to wait and see the results.

Cars comparison:

Features Honda Jazz Hyundai Elite i20 VW Maruti Baleno

Polo
Engine(CC,Petrol) 1199 1197 1198 1197
Torque(nm) 110 117 110 115
@4800 @4000 @3750 @4000
Length(mm) 3955 3985 3971 3995
Fuel Tank(litre) 40 45 45 37
Mileage(kmpl) 18.7 16.31 16.47 21.4
Prices in Rs.(Delhi 5,34,900 5,36,475 5,33,400 4,99,000
,base variant)