Vitara Brezza’s Pricing Could Catapult Maruti In SUV League

Maruti Suzuki, which launched its all-new Vitara Brezza model on Tuesday, will benefit from the compact SUV’s aggressive pricing, says Ambit Capital Research.

“Brezza has been launched at a starting price of Rs. 6.99 lakh (for the base LDi model). This is around 15 per cent cheaper than the entry-level model of EcoSport and close to 4 per cent cheaper than the entry-level TUV300 model,” the brokerage said.

Ambit estimates the Vitara Brezza to sell around 3,000 units per month in 2016-17, similar to current monthly sales volumes of peers like Ford EcoSport and Mahindra TUV300.

But considering the initial response that Brezza has got – 5,600 bookings within 48 hours of its launch – the brokerage may soon have to revise its estimates upwards.

India’s biggest carmaker is counting on the success of Brezza to make it a dominant player in the fast-growing utility-vehicle space. According to estimates, the share of utility vehicles in the passenger vehicles segment has gone up to 20 per cent in FY16, but Maruti’s share in the segment is around 15 per cent.

Maruti has failed to establish its dominance in the utility-vehicle space despite the launch of refreshed Ertiga and the introduction of the S-Cross late last year. The Brezza could be the game changer for Maruti in the utility-vehicle space, analysts say.

The success of Brezza could also help Maruti retain its market share at a time when car sales are expected to come under pressure because of higher taxes. In the Union Budget, Finance Minister Arun Jaitley imposed a cess of up to 4 per cent on new cars, and a 1 per cent luxury tax on cars priced higher than Rs. 10 lakh.

“We expect Maruti to largely maintain its market share in FY17 (46.3 per cent versus 46.8 per cent in FY16) on the back of new launches such as Vitara Brezza and Ignis,” Ambit said. The Ignis, another sub-compact crossover-SUV from Maruti, is expected to be launched later this year.

For FY17, the brokerage expects Maruti’s overall sales (domestic plus exports) to grow at 12 per cent versus 11 per cent in FY16. The domestic car industry is likely to end the current financial year with 8 per cent growth and is expected to grow at 11 per cent in FY17.

Domestic car sales growth could fall to 9 per cent in FY17 if the monsoon rains are poor as that would hurt incomes and sentiment in rural areas, said Sugato Sen, deputy director general at SIAM said.

Maruti Suzuki shares, hurt by the appreciation in yen, are on track for their third straight gain. The stock is up nearly 5 per cent since Brezza’s launch. Ambit retained its “buy” call on Maruti with a target price of Rs. 4,400.

[“source-ndtv”]