Auto sector AdEx will grow by 15-20% in FY23: Shashank Srivastava, Maruti Suzuki

Amid a spike in inflation, rising fuel prices, and a massive decline in India’s GDP growth rate in Q4, India’s largest carmaker Maruti Suzuki is headed towards making a record number of cars in the decade in the current fiscal. 

Shashank Srivastava, Senior Executive Director, Marketing & Sales, Maruti Suzuki, explains what is driving the growth of Maruti, and how this will reflect on its AdEx this year. He also shares his insights on AdEx growth of the automobile sector in general which is the second-largest contributor to AdEx in the country after the FMCG sector.

Maruti Suzuki is likely to record a 25% growth in production in the current fiscal year with 20 lakh units, compared to 16.7 lakh in the last fiscal. Which segment or category is witnessing the highest growth and why?

Maruti has always been strong in the small car segment. Over 67% of our vehicles are in the non-SUV segment. Hence, we are looking at this segment very closely. This segment grew 26 percent in FY22 and is now headed towards 40 percent growth in FY23 considering the first two months' sales.  

The auto industry is facing a shortage of semiconductor chips. How do you manage to secure your supplies? 

We have a good portfolio of vehicles, about 15 at present, which is the largest in the industry. Different models require different types of chips. We tried to adjust the production plan to keep pace with the supplies of chips. The production which was about 40% last September, has now come up to 93%. It would take some more time for things to become normal. And I can't say how much time it is going to take due to nonvisibility in the global supply chain. 

Inflation and fuel price in the country are at their peak, investors are tightening their purse strings. Many brands plan to hold their ad spends to cut losses. What would your AdEx be like in FY23 considering high growth in sales? 

The auto industry’s advertising expenditure would increase 15-20% as compared to the previous year. Last year, the auto segment accounted for Rs 5,000 crore of AdEx, out of overall Rs 57,000 crore expenditure on traditional media platforms, keeping digital aside. Half of it, that is roughly Rs 2,500 crore, was from car manufacturers alone.

I am expecting 15-20% growth this year. In the automobile industry, AdEx is dependent on 4 factors: 1) sustenance of the current brand which is important as you need to continue generating demand 2) new model launches, as you need brand positioning 3) local level where inquiries are converted into sales which are driven through print medium and 4) digital front which is getting greater traction as it involves personal advertising that would also increase. 

I don't see a reduction in the budget in any of the four avenues. Only a really deep cut in demand can spur OEMs not to spend. I don't see that happening this year. 

What could be Maruti’s AdEx in FY22?

We are almost 50% of the market. We have planned to increase our AdEx. We have several new launches lined up. We already have 15 models so sustenance expenditure would be adequate. Digital AdEx will also continue to increase. Overall, we have kept 30 percent more budget for advertising this year. 

What are the factors behind the sustained growth of the public sector company at a time when companies like Ford are selling their manufacturing plants due to mounting losses? 

Maruti has been a public limited company since 2002. We are a customer-centric organization. From our products to dealerships to sales, insurance and finance, and consumers are taken seriously. We measure customer satisfaction on all process points, whether it be pre-sales, post-sales, insurance, finance, or maintenance. We are very very concerned if a drop in customer satisfaction is reported. That is the reason we dominate the industry.

The US government has introduced a bill to curb the monopoly of tech giants Google and Facebook. How fair is their ad selling in India? 

I have not noticed anything negative in their business. One thing about the digital ad business is its measurability which makes the process robust. Going forward, these tech giants would be stronger considering the amount of data they have. Advertisers would depend a lot on these world gardens. 

The US Bill talks about how Google plays multiple roles in digital business which is unfair to other players. Google is the ad buyer, ad seller and also runs an ad exchange. The Bill seeks to allow tech giants to choose one business. Do you think that India should also bring legislation in this regard?

Across the world, tech and social media platforms are growing exponentially. Legislations have not been able to keep pace with the changes. A lot of changes are happening in the way business is conducted on these platforms. I think the government’s response time has to be much more agile across the world. 

Other carmakers have launched their EV models in an effort to reduce their carbon footprint. What is stopping Maruti to make EVs? 

EVs sale in India in 2021 was just 20,000 which is just 0.4% of 30.7 lakh non-EV units sold last year. The large-scale adoption of EV vehicles is far away due to two prime reasons - High cost of acquisition and not so developed charging infrastructure. I know, in terms of optics, it looks bad but if the choice has to be made between optics and consumers’ convenience, Maruti will choose consumers’ convenience 100% of the time. And those who are making EVs are still selling a large number of petrol-diesel cars. 

We are in the process of EV development. We will be able to launch our first EV model by 2025.