Maruti Udyog Limited's (MUL) share of the Indian passenger vehicle market dropped to below 50% in 2004-05 (Refer to Exhibit I for the performance of the Indian passenger vehicle industry and MUL between April 2003 and March 2005). The future of MUL's low-cost model - the Maruti 800 (M-800) - was at stake due to the entry of global automakers into India.

M-800 had dominated the Indian car market since it was launched in 1984. The introduction of new cars by competitors made the M-800 look obsolete as it had not been changed in any major way for over two decades. Apart from the increased competition, MUL also had a few other problems on its plate.

While Zen, Alto and WagonR were successful, Baleno failed to live up to MUL's expectations. Its utility vehicle 'Versa' met with a disastrous response from the Indian consumer. In addition, rising incomes, the growth in the used-car market, and availability of easier finance options, led customers to shift their allegiance to other models from competitors. To reduce its excessive dependence on a single model (M-800), the company had restructured the strategy for the M-800, and planned for product upgrades and new product development. In tune with changing customer preferences, the company launched its hatch-back model, 'Swift' in May 2005, to compete with Hyundai³ Getz and Fiat⁴ Palio.