Suzuki Motor Corporation (SMC) recently announced that it would invest as much as Rs 6,000 crore in India. Initially, there were doubts in the stock markets as well as the highest echelons of the government about the role of Maruti Udyog Ltd, SMC's 54 per cent Indian subsidiary, in the new investment. But the doubts vanished once SMC was able to convince the government that Maruti Udyog Ltd would be the main vehicle for the investments. Among other things, this also meant that Maruti Udyog Ltd, India's largest car maker, will become more competitive as these investments take shape.
A few hours before he left for Japan for further negotiations with the SMC brass, Maruti Udyog Ltd Managing Director Jagdish Khattar spoke to Business Standard on the road ahead for the company.
What do the Rs 6,000-crore investments mean for Maruti Udyog Ltd?
The entire investment will benefit only Maruti Udyog Ltd. We have a capacity of 5,00,000 cars a year at Gurgaon. This plant is running at full capacity. We need a new plant to make more cars. This will happen at Manesar.
A large part of this investment will also go into refurbishing the Gurgaon plant "" what the Japanese call "scrap and build". The Gurgaon plant has been undergoing constant upgradation. Only recently we completed rebuilding the paint shop at a cost of Rs 400 crore.
How much of this investment will be made by Maruti Udyog Ltd?
A very large part. We have reserves of Rs 2,000 crore. We can even take some debt. Maruti Udyog is for all practical purposes a debt-free company today.
Maruti Udyog has not been a serious player in the diesel segment of the passenger car market. Will the new diesel engine plant proposed by SMC help you fix this problem?
Once the diesel engine plant is ready in the next two years, we will launch the diesel version of our existing models and also new models. This will help us cover the entire market segment. Diesel engine cars have a 20 per cent market share in the one-million-vehicles Indian passenger car market today.
With our petrol versions we are catering to only 80 per cent of the overall market, and in that 80 per cent we have a 66 per cent market share. Our overall market share, which includes petrol and diesel, is 55 per cent. The launch of diesel cars will give us a much bigger market share.
At present you are importing diesel engines. How will your own facility help you?
This plant will not only cater to our needs but also export. This ives me reason to believe that the quality of this plant's output will be very high. Initially, we were looking at a plant with a capacity of 1,00,000 engines a year. But now we have plans for a 3,00,000-engines-a-year capacity plant with an investment of Rs 1,000 crore.
Will you also target the taxi segment with your diesel cars?
We will also target the personal cars segment.
What will be the impact of SMC's Rs 6,000-crore investment on the country's economy as a whole?
It is an accepted benchmark that every rupee invested in an utomobile plant will require an investment of Rs 2.5 downstream and in the automobile components sector. Moreover, every car produced creates 5.5 jobs in the country.
These apart, upstream investments, in terms of expanding the dealer network, will also happen. Hence, the overall impact of such investments in the economy is quite significant.
Maruti 800's market share has been falling steadily over the past three or four months, while Alto has been showing impressive performance. Is there a plan to phase out Maruti 800 completely and replace it with Alto or any other model
We do not have any plans to phase out Maruti 800. It's been iving 9,000 to 10,000 units a month. In terms of volumes, Alto and Maruti 800 are neck-to-neck now. In the first six months of this year, we have sold 59,800 units of 800 and 59,000 units of Alto.
The recent price cut in Alto has helped in improving its volumes considerably. Our market share in the A2 segment has improved from 42 per cent to 54 per cent in the first half of this fiscal. Today, Maruti Udyog Ltd is driving the growth in the A2 segment.
Our gains in the A3 segment have also been substantial. Esteem, after the launch of the improvised version, has improved its share in the A3 segment from 11 per cent to 19 per cent in September this year.
What will be cost implications of the new gear box unit once the company starts its production?
The gear box unit is still on the drawing board and the plans ave not been firmed up. But the fact is that 70 per cent of the gear box unit at present is already indigenous. Only certain critical parts that are currently imported from Japan will be localised once the new plant comes up.
SMC is planning a new R&D unit and test track in Manesar. What would this mean to Maruti Udyog Ltd?
There will be a greater focus on R&D. In fact, we will have our own model (concept to production) in the next three years. The engineers at Maruti Udyog Ltd have already worked with their Japanese counterparts in SMC in improvising the Zen, Esteem and WagonR from the conception stage. These skills will help us build our own model.
You had initiated Project Vistar some years ago to tap related business areas like used cars, insurance and so on. How is it progressing?
It has been a huge success. Dealer outlets have become an ll-encompassing place to sell everything we offer. It is not just cars, spares or service. Today, we offer insurance cover that is valid across the country.
With over 160 dealer outlets (more are coming up) across the country, claim processing is much faster for a Maruti car owner. In fact, non-Maruti car owners have been inquiring if our insurance cover will available to them as well.
The pre-owned car brand of Maruti, TrueValue, is probably the most successful one in the country. We exchange close to 2,000 pre-owned cars every month.
A reason for Maruti Udyog's success has been the price cuts it has introduced in the past several months. But have we reached a stage where prices can't be cut any further
No. In fact, we have our Project 50 underway to improve overall efficiency by 50 per cent. This has helped us cut prices by 30 per cent.
There is a general consensus that India can emerge as a hub for small cars. What are the possible hurdles?
We need considerable impetus on the policy front. Japan, for instance, has a policy for small cars. Passenger cars below 660cc are given special privileges like lower tax, insurance premium and even lower parking fee.
If such a policy is framed for small cars in India as well, then it will create a great opportunity for companies like Maruti Udyog Ltd who have a strong presence in the small cars' market.
Many of the players who do not manufacture small cars will be willing to source from these companies. In Japan, for example, the small cars from Nissan are made by SMC.
