Maruti Suzuki: What does the Street think about the auto major’s SUV push?

The Street has reacted positively to Maruti Suzuki’s (MSIL’s) push into the SUV segment, at the Auto Expo, with analysts commenting on the company possibly transforming itself and clawing back some of its lost market shares in two years.

At the Auto Expo, held in New Delhi and Greater Noida till January 18, the auto major unveiled an SUV called Fronx, a five-door off-roader Jimny and the midsize electric SUV concept car called eVX.

Also read: EVs or Hybrids: Which one will have a stronger year?

“The launch of mid-sized SUV Grand Vitara in 2022 along with two new SUVs and a long[1]range EV concept at the expo, in our view, are increasing signs of a strategic shift at Maruti to complement its historical focus on affordability with an intention to address the rising aspirations of Indian consumers,” wrote Jefferies’ analysts in their report. The brokerage has a buy call on MSIL.

Analysts at Elara Capital noted that MSIL seems to have a better read on the market, when introducing newer models. “MSIL’s model launch success rate at ~70% in the past decade is much higher than the competition’s ~14% and may aid market share recoupment, on new/refreshed SUV model launches in FY23-24,” they wrote.

The brokerage’s analysts believe that with the latest launches, the auto major will be able to raise its PV market share to 45.1% in FY24 and 46% in FY25, from 43.4% in FY22.

According to them, Maruti Suzuki lost its sizeable presence in the SUV segment after FY19; between FY17-19, the auto major had a 46% share in this category with the success of Brezza. After SUVs started becoming popular and their share in the UV category grew from 9% in FY14 to 34% in FY22, at around 38% CAGR, competitive intensity in this segment went up too.

SUV models in the market rose from seven in FY19 to around 12 in FY22. But MSIL was late to respond to this trend and its market share in the SUV segment dropped to 18% in FY22. Elara’s analysts believe that, with its recent launches, MSIL may just be able to get back its leadership position in SUV segment.

“We believe a feature-rich launch from MSIL was much needed to restore its position in this segment and will be well met by newly launched Fronx, which follows the recently-launched New Brezza in this segment,” wrote the Elara analysts.

“While there may be some cannibalization among Fronx and Baleno, we project an incremental monthly volume addition of 6,000-7,000 for MSIL in FY24E-25E,” they added in their report. They have a Buy call on the stock, with a target price of Rs 11,400 or with a 35% upside from the current market price.

Also check out: Which were the top launches at the Auto Expo 2023?

Analysts at Anand Rathi differ slightly, in that they don’t believe Fronx will cannibalise Baleno’s customer base. They wrote, “we believe the (Baleno) hatchback has a pre-determined customer.” The brokerage report stated that as the auto major ramps up production of Grand Vitara, and launches Fronx and Jimny, the auto major could generate 22,000 to 25,000 volumes and improve its market share to 45% by FY25.

On MSIL’s Jimny, Elara’s analysts wrote that the new model will be able to get similar numbers as the category leader, which is Mahindra and Mahindra’s Thar. “The off-roading segment has been a low-volume category, with 9MFY23 volumes of only 32,700 (~1.1% share of PV), mostly concentrated in MM’s Thar. We expect Jimny to incrementally add monthly volumes of 4,000-5,000 for FY24E-25E, likely clocking similar volumes as MM’s Thar,” they wrote.

The stock closed at Rs 8,478.05 today, which was 1.17% higher than its previous close on NSE.