In Un­cer­tain Times, Maruti Out to Woo Govt Em­ploy­ees

Co has put to­gether a data­base of 17 mil­lion govt staff, tar­gets 18% sales from the group

The Economic Times - - Brands: Creating Desire - Sharmistha.M@ times­group.com 2006

New Delhi: The na­tion’s largest car maker is out to woo govern­ment em­ploy­ees, who it ex­pects will soon have some ex­tra cash in hand.

Maruti Suzuki has put to­gether a mas­sive data­base of nearly 17 mil­lion peo­ple — 4.7 mil­lion cen­tral govern­ment em­ploy­ees, 7 mil­lion state govern­ment staff and 5.2 mil­lion pen­sion­ers — and is tar­get­ing as much as 18% of its over­all sales to come from this group over the next two to three years. In the just ended fis­cal year, govern­ment em­ploy­ees bought about16% of the over 1.3 mil­lion ve­hi­cles the com­pany sold in the do­mes­tic mar­ket.

This is kind of a hedg­ing strat­egy by the com­pany that makes one in every two cars sold in In­dia.

An un­cer­tain econ­omy, con­sec­u­tive years of drought that hurt the farm sec­tor and weak­ened the pur­chas­ing power of ru­ral con­sumers, as well as pol­icy con­cerns have badly hit the auto mar­ket in the coun­try. Maruti has so far man­aged to post healthy sales vol­ume, but spend­ing on ad­ver­tise­ments and large dis­counts to at­tract buy­ers have dented mar­gins and, for the first time in two years, it posted a lower profit for the quar­ter ended on March 31.

It is pro­ject­ing dou­ble-digit growth for the fis­cal year that be­gan on April 1. Though the econ­omy is show­ing some im­prove­ment and rains are ex­pected to be bet­ter this year, these fac­tors may not work out the way it is pre­dicted. Govern­ment em­ploy­ees, with them soon get­ting a salary hike based on the Sev­enth Pay Com­mis­sion rec­om­men­da­tions, can be a surer bet.

“In the case of the Sixth Pay Com­mis­sion, there were two-three big ar­rears that gave mo­men­tum and push to the sales to govern­ment em­ploy­ees. In the Sev­enth Pay Com­mis­sion, there are no ar­rears, but it will help en­hance dis­pos­able in­come,” said RS Kalsi, ex­ec­u­tive di­rec­tor for sales and mar­ket­ing at Maruti. “The sec­ond big ticket pur­chase for a house­hold af­ter home is a car. Be­sides, cus­tomers have the op­tion to up­grade, exchange or buy ad­di­tional car.” Govern­ment em­ploy­ees are cau­tious buy­ers, who pri­ori­tise pur­chase of home, education of chil­dren and ex­penses on mar­riage over procur­ing a ve­hi­cle, Kalsi said. But es­tab­lished brands with wide­spread sales and ser­vice net­work en­joy pref­er­ence when they do look for a car to buy, he added. “We are up­beat about the im­pact of the Sev­enth Pay Com­mis­sion on our ve­hi­cle sales. Re­fer­rals, re­li­a­bil­ity, cred­i­bil­ity of the brand, cost of own­er­ship all play a de­ci­sive role in con­vert­ing en­quiries into pur­chases with this cus­tomer set,” he said”. We ex­pect stag­gered re­sults, spread over two-three years.”

Maruti Suzuki has sold 1.5 mil­lion ve­hi­cles to govern­ment em­ploy­ees since the 2006 launch of the Wheels of In­dia ini­tia­tive tar­geted at them. The Sixth Pay Com­mis­sion had re­sulted in a sig­nif­i­cant rise in the salaries of govern­ment em­ploy­ees. Many re­ceived ar­rears, which left them with cash in hand to pur­chase ve­hi­cles. Sales of pas­sen­ger ve­hi­cles grew around 19% in 2009-10 and 28% the fol­low­ing year, and in­dus­try ex­perts cite the pay in­crease to govern­ment em­ploy­ees as a rea­son. Though that may not be the case this time, as no ar­rears are ex­pected to be paid, Maruti hopes the increased salaries will still al­low many to af­ford EMIs.

At 30%, the Alto hatch­back is the car that most govern­ment em­ploy­ees buy, fol­lowed by other com­pact cars such as WagonR, Swift and DZire. The Sev­enth Pay Com­mis­sion has rec­om­mended an ag­gre­gate salary hike of 24% to cen­tral govern­ment em­ploy­ees and pen­sion­ers, which is ex­pected to boost con­sump­tion spend­ing.

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