Analysts see Ertiga driving Maruti

This story first appeared in DNA Money edition on Saturday, April 14, 2012.

Ertiga, the newest offering from the Maruti Suzuki stable that aims to create a new segment within the multi-purpose vehicle (MPV) space, has got a huge thumbs-up from analysts.

They feel with Ertiga, the company has a strong product in terms of value of money, design, mileage and pricing, which would give it a strong footing in the 370,000 unit per annum utility vehicle (UV) market, where it did not have a presence. With an attractive introductory price proposition (Rs589,000 -845,000), Ertiga poses a challenge to current leaders Toyota’s Innova (starting price: Rs914,000) and M&M’s Xylo (starting price: Rs734,000).

Toyota and M&M have a combined volume of 9,000 units per month. While Maruti is targeting 4,000-5,000 units per month, analysts see it selling 2,000-3,000 units.

Kaushal Maroo and Keyur Vora, analysts, Religare Capital Markets, said, “The Ertiga will occupy a niche between premium hatchbacks and larger utility vehicles. Given its brand equity and reach, we expect the Ertiga to clock a monthly run-rate of 3,000 units.”

MPVs accounts for 10% of the total passenger vehicle market and in the past three years have outpaced car volume growth. According to industry estimates, about 10 million vehicle owners are looking for an upgrade, which spells a huge opportunity for Ertiga.

Hitesh Goel, analyst, Kotak Institutional Equities Research, said, “It could be attractive for a customer who is buying Xylo, Sumo Grande and Tavera as it is more compact and offers better value than these models (better fuel efficiency and lower price). However, Ertiga is under-powered compared with Xylo and Innova.”

Maruti is looking to differentiate the vehicle on two counts—its sedan-like handling, better driveability and fuel efficiency —16.02 / 20.77kmpl for petrol/diesel variants.

Jatin Chawla and Akshay Saxena, research analysts, Credit Suisse, said, “The Ertiga is around 30% lighter than the Xylo. Hence, despite its significantly smaller 1.3 litre diesel engine than Xylo’s 2.5 litre engine, the differences in power and torque are not as significant. Moreover, the Ertiga is built on a monocoque design (like the XUV), compared to a body on a frame chassis in the Xylo. Hence, the handling is much better, which should appeal to the personal segment.”

However, the competition would follow soon.

While Renault is introducing compact SUV Duster, Ford is bringing in the EcoSport, Nissan is coming with Evalia, M&M mini Xylo and GM is planning a new MPV.

“These products are likely to be priced between Rs 600,000 and Rs 10,00,000,” said Aditya Makharia and Ritesh Gupta, analysts, JPMorgan.

Deepak Jain, equity research, MF Global, said a number of compact MPVs are to be launched this fiscal but the Ertiga’s launch provides Maruti a head-start.

Meanwhile, Maruti will start exporting Ertiga to Indonesia by end of the next month.