Pricing Strategies of Maruti Suzuki

By
Debdutta Mitra
MBA (Marketing & Sales)
Section-A
Roll no-13
2022-24

Submitted to
Dr. Rahul Gupta

AMITY BUSINESS SCHOOL

Abstract
Maruti Suzuki entered the Indian car market as a game-changer, disrupting the landscape
with its focus on affordability. This research looks into the automaker's pricing strategy,
analysing how it revolutionized car ownership for the Indian middle class. The company
transformed the Indian automotive landscape, putting personal mobility within the reach of
crores of the country's population.
The study looks into how the Indo-Japanese automaker achieved affordability via factors
such as localisation of manufacturing, value-based engineering, and a keen understanding of
customer needs. The research also looks on how Maruti Suzuki sustained an "affordability
edge" over the years by adjusting to the market volatility, increasing competition and rising
input costs
The study also throws light on the effectiveness of the carmakers driving affordability
approach and its impact on the Indian automobile market. It also examines the strategies
deployed by the company on pricing for its various car segments from, small hatchbacks to
premium SUVs and how it leveraged pricing for brand positioning. It also looks into the
future of the company’s pricing strategy in the context of evolving consumer preferences,
technological changes such as the introduction of EVs and the criticism of the company
compromising on passenger safety and quality of raw materials.
Keywords: Maruti Suzuki, Maruti cars, 800, Maruti cars price, Mileage, Automobile, Suzuki,
Automakers, Car, Passenger vehicles
 Chapter I – Introduction
With household incomes of many Indian citizens increasing within the last decade, there has
been an increasing demand for diverse passenger cars. It is expected that the country will
have 1.5 billion passenger cars by 2050, a double-manifold increase from 2010. Adding to
that, the growth rate of the Indian economy as also attracted a huge demand in the small car
industry, and it was all possible when, in 1983, Maruti Suzuki rolled out its first car in India.
Before Independence, India only saw imported cars on its roads that were used by the elite
and during the 1950s, the automobile industry was centred only around three companies -
Hindustan Motors in Kolkata, Premier Automobiles in Mumbai and Standard Motors in
Chennai and. In those times, the industry faced a lot of challenges in India thanks to rigid
tariff and licensing policies by the government which affected expansion. With this lack of
competition, automobile manufacturers had to keep high prices for its vehicles and adding to
that, there were long waiting periods for such cars.
While Tata, Mahindra and Bajaj did make a mark in the overall automobile market during
those days, they weren't able to enter into the passenger vehicle market. In 1953, there were
efforts from both public and private sectors to boost the automobile components making
industry and by late 1970s, there were major changes though the passenger vehicle market
remain stagnant.
Hence, with an objective to boost the passenger vehicle segment, the government of India
incorporated Maruti Udyog Ltd in 1981 and a year later, the company signed a joined-venture
agreement with Japan's Suzuki Motor corporation.
In December 1983, when the company launched the 'Maruti 800' hatchback, the model
became a benchmark for affordable car ownership not only in India but the entire globe. With
a price tag of around Rs 2 lakh, the vehicle soon flooded Indian roads and it, along with the
manufacturer's other low-cost models like Omni and Gypsy that were launched later, was
seen as an ideal car meant for Indian roads. The 800 soon became a market leader for the next
two decades till the company launched Alto, which was another pocket-friendly offering the
hatchback segment with a price slightly higher than 800.
The company's foray into the entry-level premium segment began in 1990 with the launch of
the 'Maruti 1000' sedan (later renamed as Maruti Esteem), which competed with Premier's
118 NE and Hindustan Motors' Contessa. Three years later, it launched the Zen hatchback,
which had an aluminium engine, electronic distributor and fuel pump, a first in the country.
The company made a breakthrough with the launch of its spinoff premium car segment under
the 'NEXA' brand name which has separate showrooms. With proper marketing strategies, the
company came up with a portfolio that caters to market that aren't within its original segment
of cars.
Today, the Indo-Japanese carmaker sells different types of cars using its ARENA and NEXA
brands with latter catering to premium segment models. It also sells certified used cars via
TRUE VALUE and commercial vehicles via the 'Maruti Suzuki Commercial' channel
Today the company has 18 passenger vehicle models in production in all segments. Here is a
table to classify them.
Hatchbacks Alto, Alto K10, S-Presso, Celerio, Swift, WagonR, Ignis (NEXA), Baleno (NEXA)
Vans Eeco
Sedans Dzire, Ciaz (NEXA)
MPV Ertiga, XL6 (NEXA), Invicto (NEXA)
SUV Vitara Brezza, Fronx (NEXA), Jimny (NEXA), Grand Vitara (NEXA)

With the company now existing for over four decades now, it has been able to retain its
market leader position via low priced-models that syncs with the middle-class Indian’s
budget. The company is said to have tripled its sales volume to twelve lakhs by 2014, with
net revenue per unit increasing by three-fourths.
While the company's nearest rival Hyundai also saw a similar increase in sales volumes per
unit, its net revenue went unchanged. The company experienced its first major revenue fall in
FY2010-11 when its market share dropped by around 9 per cent to 44.9 per cent.
With complex consumer behaviour in car purchasing decisions has led to constant
modifications in car models in terms of design and features and with the market becoming
very competitive. In 2014, UK-based Global NCAP revealed in its report brought in
awareness on safety and build quality among consumers . This has now become a huge
challenge for Maruti Suzuki as its cars were unable to perform well in these crash tests.
 Chapter II – Literature Review
(Lokhande and Rana, 2013) have cited the history of Indian passenger car industry in an
concise manner and stated that in today's volatile and competitive automobile market, Maruti
Suzuki has occupied the lead due to its strategic marketing, brand positioning and advertising
techniques They also mention how Maruti countered competition by introducing price cuts in
its some models like WagonR and Maruti 800 in 2000. (Leykun, 2019) has done a critical
analysis of the Indian four-wheeler industry where he felt that "self-governing" cars will be
on streets by 2020. He also has brought in a detailed study of Maruti Suzuki in his report
mentioning the company’s history and human resources statistics in detail along with its
environmental scanning.
(Rai and Choudhury, 2014) bring out the importance of pricing as a key component of
marketing strategy and its use in a price-sensitive market in India and how Maruti Suzuki has
retained its market leadership via less-priced car models which suits Indian middle-class car
buyers' budget. (Chakraborty & Biswal, 2023) have mentioned Maruti Suzuki's subscription
model strategy launched during the COVID-induced economic crisis when the company
reported zero car sales in April 2020. The authors also strategies mitigation strategies that can
be adopted by Maruti Suzuki on external environmental changes and crisis situations.
(Ramya, 2016) highlight that the main indicators that influence car buyers to choose Maruti
Suzuki are mileage, maintenance and price and that the brand can look more upon brining
innovative designs and work on upcoming trends and technologies to target more diverse
segments.
(Revathi et al, 2017) cites Maruti Suzuki's success lies in its restructuring of its advertising
strategies and constant innovation of its product and services. The authors also felt that that
any car brand with good reputation is likely to have a high customer trust, with some
customers even going to the extent of paying a lot of money and making it difficult for other
brands to compete. However, (Paulose, 2017) cites that with its parent company being
"Suzuki" which specialises in small cars within a limited portfolio, it will be a challenge for
Maruti Suzuki in expanding its market. Yet, it has a very high focus on the Indian market with
an extensive understanding of its passenger vehicle needs and it is now able to cater to
vehicle buyers like no other company. The author also cites that the birth of “NEXA” was due
to the failure of premium models like SX4 and Kizashi, especially coming from a brand that
specializes in offering value in low price.
According to (Taneja, 2015), price and safety features do influence purchase decisions of car
buyers and carmakers feel that with basic safety features like ABS and airbags, vehicle prices
will increase by 8-15 per cent. The author also cited that majority of consumers may spend
around Rs 40,000 extra for safety features.
(Malhotra and Sinharay, 2013) cite Maruti Suzuki's pricing strategy as one meant for market
penetration. While it sells cars for all segments at different prices, Maruti enjoys a huge brand
loyalty in the form of repeat customers. The company's pricing strategy is such that it is
meant to attract those looking for upgrading their existing car and with the variety offered by
the automaker, consumers from all segments can buy their cars. The authors also cited that
the automaker's cost reduction strategy is helping in its operational efficiency with an
indigenization level of 85-90 per cent for all models.
According to (Prajapati and Kumar, 2023), the automaker sells many different car models
with different features and prices with pricing strategies that give them a competitive edge in
India. The authors also cite that the carmaker focuses on providing value-for-money models
and pricing their offerings in a competitive manner. Their tactics include market skimming,
value-based pricing and cost leadership to appeal to price-sensitive Indian car buyers.
According to (Kamal et al, 2020), the modern car buyer is highly conscious of both safety
and performance when making a car purchase decision. While price sensitivity is a factor,
they also seek a value-for-money proposition hen deciding which brand and model to invest
in. Typically, consumers prioritize durable products with minimal maintenance hassles,
aiming for long-term ownership and considering resale value. Maintenance costs weigh
heavily in the decision-making process for Indian consumers when selecting a brand and
model.
When it comes to pricing, a car buyer finds satisfaction with the brand's offerings. They
meticulously compare features across competitive brands before determining the acceptable
price range for their preferred brand. Generally, product pricing reflects the quality and safety
features integrated into various brands
 Chapter III- Research Methodology
Research Objectives:
The primary objective of this research is to analyse the low pricing strategies employed by
Maruti Suzuki in the Indian car market and how these have contributed to the company's
reputation for affordable products which has resulted in the automaker in achieving market
dominance.
Research Design
The study adopts a non-experimental, descriptive design in utilizing secondary data which
offers a cost-effective and efficient way to gather insights into existing knowledge on the
topic
Data Sources
Company Reports: Annual reports, financial statements and press releases from Maruti
Suzuki will be a valuable source of information on their pricing strategy, production costs and
market segmentation.
Industry Reports: Reports from market research firms such as NCAP and IBEF will provide
information on industry trends and consumer behaviour analysis patter on car pricing in
India.
Government Reports: Data and reports from government agencies such as SIAM and
Ministry of transport will throw light into government regulations, policies and tax structures
that impact any such pricing strategy
Academic Papers: Peer-reviewed research reports and articles that have been written for
academic publications to provide insights into the theoretical frameworks and case studies on
pricing strategies in the passenger car industry.
News Articles: Articles from credible media outlets can show recent happenings and expert
opinions on Maruti Suzuki's pricing strategies.
Data Collection Methods
Online Databases: Online websites will include industry research portals and government
websites to access relevant reports and publications.
Library Resources: Academic libraries and online resources containing published articles
and journals will be studied
Data Analysis Techniques
Content Analysis: Data and information from reports and articles will be analysed to identify
key strategies, trends and tactics on Maruti Suzuki's pricing approach
Comparative Analysis: Pricing data from Maruti Suzuki and its competitors will be
compared to understand their pricing strategies and market positioning
Case Study Analysis: Existing case studies or industry reports analysing Maruti Suzuki's
pricing strategies can be reviews to gain deeper insights
Data Validation Techniques
Data Consistency: Data collected from various sources will be compared to ensure
consistency and any prospective bias will be identified
Data Credibility: The credibility of sources will be assessed on the basis of their reputation
and publication date
Limitations of the Study
The research relies solely on secondary data, which can hinder the depth of analysis and the
ability to gather firsthand opinion from car users and auto industry experts.
Research Outcome
The research is expected to provide a comprehensive analysis of Maruti Suzuki's pricing
strategies in the Indian car market. it will identify the key factors contributing to their
affordability advantage, their approach to segmentation and product pricing. It will also look
on their strategies to navigate against competition in the market with the findings offering
valuable insights for understanding Maruti Suzuki's success in the Indian market and the role
of pricing strategies in the automobile industry
This research methodology outlines a plan for Maruti Suzuki's pricing strategy using
secondary data sources and with this method, the research can achieve its objective and
provide valuable insights into the company's success in the Indian market.
 Chapter IV- Data Collection
The price of a product reflects the sum a customer invests in its acquisition. Businesses have
the flexibility to adjust this price based on market fluctuations and dynamics such as
competition from manufacturers offering similar product. Unlike other elements, pricing
directly influences revenue rather than expenses, making its effects particularly significant.
Effective pricing strategies not only underscore the importance of strategic decisions but also
communicate these decisions to customers in a manner that is comprehensible and
meaningful to them.
Maruti Suzuki wants to offer good quality vehicles for a good price to its customers and they
have been able to do this since their inception. While their cars are not heavy and do lack in
degree of build quality, their vehicles have a good road grip. With its competitive pricing
policy of pricing the car lesser than other brands, they are also able to gain competitive edge.
However, many of its products such as Baleno sedan, Kizashi, Versa and old Grand Vitara
failed due to the framework of its pricing policies. Taking the case of its Baleno sedan
launched in 1999, the company initially adopted a pricing strategy centred around the product
ad its costs. Maruti Suzuki had a distinct vision of introducing a car within a particular
market segment, thus the pricing was tailored accordingly. To compete against Mitsubishi
Lancer and Honda City, the car had an ex-showroom price tag of Rs 8 lakhs which was
deemed steep for that time. This positioning made it one of the most expensive cars in its
segment, a departure from Maruti's reputation for delivering value for money. Consequently,
this pricing strategy didn't resonate well with customers
Furthermore, the approach was heavily influenced by costs, as numerous components of the
Baleno were sourced from abroad, reflecting in its pricing structure. Maruti Suzuki was
confident that they possesses a winning product that would allow them to establish a
significant presence in a previously unexplored segment.
However, the Baleno struggled to attract customers primarily due to its high price point,
attributed to the imported engine rather than domestically manufactured components. Also,
things didn't unfold as expected a study recognized a glaring disparity between the pricing
and the positioning as the likely cause for the failure. The vehicle also failed at its positioning
as it was aimed at prosperous middle-aged professionals. A study found out that the
mentioned demographic prioritizes sophistication, reliability, status and exclusivity when
choosing a car. the price range of the sedan itself suggested luxury and sophistication.
However, the vehicle's ads depicted the car as ideal for frequent travellers, subtly likening it
to an aeroplane and highlighting its speed and superior performance.
In late 2004, after several years of stagnation, Maruti Suzuki attempted to revive the Baleno
by slashing prices significantly by around 25%, bringing them down from a range of Rs 7.6-
8.6 lakhs to a more affordable Rs 5.6-6.5 lakhs. This price reduction was accompanied by an
upgrade n features with the addition of amenities like automatic ORVMs and climate control
systems, making the vehicle a more attractive value proposition.
However, this move felt like a last-minute attempt to save a sinking ship as the company was
already working on the SX4, a replacement for the upper C-segment (where the Baleno was
placed). The carmaker stumbled again by failing to adjust their marketing strategy to reflect
the new price point and features. they continued to target middle-aged business executives,
emphasizing on luxury and exclusivity - messaging that didn't resonate with the newfound
affordability. unsurprisingly, this price cut and feature upgrade failed to breathe life back into
the Baleno sedan, leading to its eventual phasing out.
In 1983, when Maruti Suzuki launched its inaugural car, it primarily thrived on the merits of
Japanese design and strategic pricing tactics. By 2009-10, having strengthened its presence in
urban and semi-urban markets, Maruti Suzuki India resolved to venture decisively into the
rural Indian market with a campaign 'Mera Sapna Meri Maruti'. However, the automaker
soon realized that selling cars to rural consumers entailed more than just persuading them for
an initial purchase. It required sustained investment and a keen awareness of their evolving
aspirations to maintain trust and loyalty. Despite Maruti's ability to offer competitive pricing,
its extensive range of variants across different car categories ensured rural customers had
ample choices within their comfortable price range
Another aspect of Maruti Suzuki's low pricing strategy is its supplier development amid the
automobile manufacturing industry's intricate nature where the production of a single
passenger car demands over 2,000 individual components. Maruti Suzuki was tasked with
creating a "people's car", one that was a bit affordable and of superior quality. Recognizing
that achieving affordability relied on securing high-quality components from local suppliers,
Maruti Suzuki embarked on a strategic approach.
Initially, Maruti Suzuki aimed to ramp up production significantly. In 1982, many suppliers
of spare parts doubted the company's capability to manufacture one lakh units within five
years. This scepticism came from the fact that before the carmaker's entry in the market,
majority of the automakers combined produced only 40,000 units annually.
However, Maruti Suzuki held firm to the belief that achieving economies of scale was
crucial. They understood that high volumes were essential for driving down production costs
and enhancing quality. Surprisingly, Maruti Suzuki shattered expectations by achieving the
milestone of producing one lakh cars within the third year of its launch itself.
In it Maruti Suzuki enjoyed minimal competition, leading to a somewhat lax attitude towards
its vendor base and cost management. A former executive of the company Sudam Maitra, in
an interview, recalled a time when vendors would annually request price increase due to
rising input costs, a request the company often accepted due to its monopoly status.
However, with the entry of competitors in the market, the landscape changed and the mandate
was ow to deliver high-quality products to dealers at prices undercutting the competition,
necessitating a reassessment of procurement strategies. The company soon embraced the
concept of 'target costing'.
Under this, a reverse calculation method was involved where material costs were fixed
according to the market price of the vehicle which was decided by the company. initially
surprising vendors, Maruti Suzuki informed them of a paradigm shift: rather than annual
upward price revisions, they were now expected to strive for downward price revisions each
year
Today, Maruti Suzuki has excelled in making big cars as well as they now have a 20 per cent
market for the same. While Mahindra Automobiles is known to be a king in the SUV
segment, with the launch of four new models like Fronx, Jimny and Grand Vitara since 2022,
it has made Indian customers buy more of its big cars as well.
For pricing its cars, Maruti Suzuki has deployed a pricing strategy that is a balance of both
penetrative and competitive. It indicates that while its target is to attract customers to its
offerings with a lower price initially, it also considers the stiff competition offered by
companies such as Hyundai and Tata.
As mentioned earlier, Maruti Suzuki has been including tactics such market skimming, value-
based pricing and cost leadership in its pricing strategies.
However, the company has been losing its key market share in the small car segment which
has a price tag of Rs 4-7 lakhs range with the figure dropping below 60 per cent for FY 2023-
24 as shown in the figure below.

Market share of small cars of MSIL ( in %)

70
68
66
64
62
60
58
56
54
52
FY19 FY20 FY21 FY22 FY23 FY24 (YTD)

Market share ( in%)

 Chapter V- Conclusion
Maruti Suzuki's pricing strategies have played a crucial role in their success allowing them to
offer good quality vehicles at competitive prices. However, there were few instances with
certain models due to their pricing policies: For example, the Baleno sedan which was
launched in 1999, failed to attract customers initially because of its high price point an
disconnect between pricing and positioning of the car. to revive the Baleno, Maruti Suzuki
slashed prices and added new features, but this move was not successful in saving the sedan.
In their early years, Maruti Suzuki focused on Japanese design and strategic pricing to
establish their presence in the market. They later targeted the rural Indian market with
establish a campaign called Mera "Sapna Meri Maruti", recognizing that selling cars to rural
consumers required sustained investment and an understanding of evolving aspirations.
Despite offering competitive pricing, Maruti Suzuki also ensured a wide range of variants in
different price ranges to cater to the preferences of rural customers. Maruti Suzuki employ
tactics such as market skimming, value-based pricing and cost leadership in their pricing
strategies.
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