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Maruti Suzuki RC Bhargava interview:Hopes to boost production by 12-14% this year

admin — Sat, 19 Mar 2011 05:42:54 +0000

Maruti Suzuki RC Bhargava interview:Hopes to boost production by 12-14% this year

Below is transcript of RC Bhargava interview with CNBC-TV18’s Latha Venkatesh and Sonia Shenoy.

Q: What is your take on the budget this year?
A: The automobile industry and I personally are quite happy with the budget. It was a good budget which contained nothing at all negative for the automobile industry and the way the finance minister has gone about suggesting all the areas where action is required, assuming that all those things happen, it will be good for the economy. The economy will grow and if that happens, the automobile sector will continue to do well.

Q: Two concerns for the auto industry are rising crude prices and with inflation concerns, a hike in interest rates may come about. How do you see these factors impacting the industry? What kind of growth trajectory do you have for this year?
A: We can do very little about the rising crude prices and therefore, the fuel prices. Our experience in the past has been that there is no long-term impact on the sale of cars as a result of the increase in fuel prices. For Maruti, personally, I believe, this will not be a bad thing at all. People will prefer more and more fuel efficient cars. Therefore, the smaller car market will get a boost out of it, if anything at all happens because of a fuel price hike.
As far as inflation and the consequences of inflation on demands and interest rates, interest rates have already peaked. I believe there is not going to be much change upwards in interest rates nor in the coming months. With this kind of rates of interest, I don’t think there is going to be much impact on the sale at all.

Q: There are a lot of expectations that the volume targets may be lower in FY12 compared to what we did in FY11? What are your volume targets for this year?
A: Our major constraint this time is not going to be the demand in the market, but the capacity to produce. We are running at full stretch. The second line at Manesar will be completed in the second half of this year. That will help us increase production. Other than that there is nothing much in the way of extra capacity which is coming in this year.
With that happening probably we can at best increase production this year by around 12-14%. The exact number will get determined when we have our board meeting on March 25 which will determine next year’s budget and plan.

Q: For the next line of production that comes up at Manesar, how much would you be pumping in, in terms of capex?
A: Capex we are spending of course on completing the second line at Manesar. Work is also going on, on the third line at Manesar. That line is a Rs 2,000 crore line which will be spread over this year and next year. The research and development (R&D) center work will continue where we will make investments.
We will also continue to make investments in the marketing infrastructure which means setting up regional stockyards for cars, spare parts distribution centers, regional offices etc. The exact number of the budget for the capex will only be available to you after the budget meeting March 25.

Q: What is the focus for Maruti in FY12-13 going to be? Is it going to be largely domestic, which means your dependence on the yen is likely to go down?
A: No, the market to which we have to cater is certainly the domestic market and that’s the fastest growing market. We cannot, not cater to the domestic market, which is our main market. The yen is not related to this.
The dependence on the yen is related to localization of component, not only by us but by our vendors because they are a bigger importer of components than we are. They have to localize to reduce the dependence on the yen but otherwise a large part of our sales will always be in the domestic market.

Q: Is your delivery for Kizashi on track and what is the expected sales target for FY12?
A: Our schedule for delivery of Kizashi is from the middle of March and we are on schedule to start delivering. The amount of cars that we can deliver depends on what we receive from Japan. There is a lead time because we have to order first then it gets produced and then it gets shipped. It’s not something which we can ramp up on short notice. Possibly, there will be a slight shortage for sometime to come. I can’t say that there will not be a waiting time or shortage for this car for some months in the near future.

Source: moneycontrol

Maruti Suzuki add more 5 lakh unit/year by March 2013

admin — Sat, 05 Feb 2011 07:46:19 +0000

Maruti Suzuki add more 5 lakh unit/year by March 2013

Maruti Suzuki Chief General Manager Shashank Srivastava told that The company is confident of closing FY11 with sales of 1.2 million units as it is consistently doing around 100,000 units a month, he said. Commodity prices on the input side and forex exchange movements will have an impact on the company’s profitability, he said.

For the long term, the story stays “very bullish” even though he is “not sure” about next year, Srivastava added.

However, the company plans to ramp-up its total by 500,000 units by the end of March 2013 from adding new line at the second plant and open the new plant, taking the total capacity to up to 17 lakh units.

Admin

After culling the herd, Suzuki seeks new dealers

admin — Sat, 22 Jan 2011 01:37:44 +0000

After culling the herd, Suzuki seeks new dealers

American Suzuki Motor Corp. is recruiting dealers after buyouts and departures slashed its dealership roster last year.

Suzuki is targeting dealers in metropolitan areas across the United States, said Chris White, senior manager of dealer development.

About 15 new dealers were appointed in 2010, and 15 others were brought in through buy-sell transactions. White expects more deals as spring approaches.

“I honestly believe that as things thaw out, we’ll accelerate” recruiting, he said. “I think we’ll be aggressive, and there are a lot of people that are interested in a [Suzuki] franchise right now.”

Last year Suzuki tried to rid itself of its worst-performing dealerships, many of which averaged as few as one or two new-vehicle sales per month.

The brand has about 290 dealerships after beginning 2010 with about 350.

About 50 of Suzuki’s worst-performing dealers accepted buyout offers between last March and Aug. 1. Suzuki also offered to help poor-performing dealers improve their operations, Suzuki spokesman Jeff Holland said.

Under the buyout program, Suzuki offered owners of poor-performing stores up to $50,000 and pledged to buy back inventory, parts, special tools and signs from dealerships targeted by the program.

“It’s about getting the poor-performing dealers out and getting good dealers back in that will help us be successful,” White said.

About 100 dealers initially refused the buyout offer. Suzuki continued to shed dealers through the end of 2010 as some dealers voluntarily closed, White said.

“A handful of dealers did it, probably because the market is still difficult and nature took its course,” White said.

Suzuki has no specific target for how many dealers it wants to add, White said.

Re-entering U.S. metropolitan markets where it lacks a presence also is a priority. Suzuki has its strongest presence in the Pacific Northwest and the Southeast, so the company is looking outside those areas. He declined to name specific markets.

White said Suzuki wants dealers with good reputations for customer satisfaction, strong internal processes and, at least in some cases, vacant facilities caused by the wind-downs of such brands as Hummer, Pontiac and Saturn.

Suzuki sales plummeted 38 percent last year to just 23,994 vehicles, while industry sales rose 11 percent.

The brand sells only four nameplates, and its marketing budget has been limited because of its poor sales.

Source: autonews

Interview:Mr R.C Bhargava, Chairman, Maruti Suzuki,‘Rural prosperity will provide another market for growth’

admin — Fri, 21 Jan 2011 08:35:48 +0000

Interview:Mr R.C Bhargava, Chairman, Maruti Suzuki,‘Rural prosperity will provide another market for growth’

On the back of strong demand from a rapidly growing economy, car market leader Maruti Suzuki had had a good 2010.

It now has big plans ahead as it looks to take its installed production capacity, in stages, to 17.5 lakh units a year, enter new market segments and work out a fresh product strategy in partnership with German automaker Volkswagen.

In an interview, the Maruti Suzuki Chairman, Mr R.C. Bhargava, tells Business Line what lies ahead for the domestic auto market and how foreseeable challenges can be overcome to sustain growth.

How do you think the growth of the auto industry will pan out in 5-10 years?

I see the industry growing rapidly at a pace similar to what was seen this year, but the bulk of the growth will be from small cars. The growth of the auto industry anywhere in the world is very much related to the growing economy and the purchasing power of individuals. Cars are aspirational products and those who can’t get one go for a two-wheeler, irrespective of how good the public transport system is.

In India, the economic growth has been good in the last several years and the per capita income has gone above $1,000. In the last five years, per capita income has gone up by 7.5 per cent, but prices of cars have only grown about 1.5 per cent a year — so, the affordability has increased. A small car like Alto has become twice as affordable. The Alto in 2005 took 96 months of per capita income to buy, but in 2010 this has come down to 51 months. The number of people above the per capita income has also gone up substantially.

We should be one of the top five auto markets in the next 10 years. Especially if the rural demand grows, I think car sales should continue to grow at more than 20 per cent.

One also has to see how the GST in 2012 affects the excise duties for cars — will the excise differential for small cars continue?… And that’s a policy decision.
In which areas do you think reforms are needed that would help the auto sector grow?

Infrastructure is weak and the problem is that the Government’s ability to implement infrastructure projects is quite inadequate. We have seen over the last 60 years that most such projects have had both considerable time and cost overruns. Higher private sector involvement through PPP is one way how this can be mitigated. Financial sector reforms also need to be speed up. There should be as free a regime for investment as possible – I don’t see any great danger to India’s economic or political independence.

The fundamental area of weakness today is the agricultural sector, where reforms are grossly overdue. With so many people in such areas, agrarian reforms need be pushed and treated in the same way as the industry. This cannot be done piecemeal, the whole chain has to be looked in to – from the stage of inputs for production to marketing, reforms have to ensure that the farmer gets most value. Higher agricultural productivity will also help control inflation. With rising incomes, the demand for better quality of food will go up much faster. Rural prosperity will also provide another market for industrial growth.

The third key sector for improvement is education. The availability of well-trained skilled people is already a bottleneck for economic growth. Wages are going up faster than they should – because of the lack of good people. The only way to maintain a competitive edge is to increase the supply of skilled people. Government policy needs to encourage the private sector in education funding, by allowing it to make money as in any other industrial activity.
How do you think Maruti will benefit from the Suzuki-Volkswagen partnership?

That’s an area where a lot of details are still not clear. The discussions are on at a global level. What we think may be an advantage may not be what Volkswagen has in mind. Let us say Volkswagen wants to have a large presence in India — that may be detrimental for us. Obviously, we would be interested in new technologies, such as larger diesel engines, hybrids, electric cars and fuel cell technology. Those are important for the future and how to get them is a question. If Volkswagen can give, then that is only better, but who knows…

With petrol prices rising, what kind of other technologies do you think can provide sustainable transportation systems in India?

Best fuel, from the environment point of view which can have a quick expansion of network and lower emission levels, is Compressed Natural Gas. The policy on making CNG available for the transportation sector is not very clear yet. There is a lot of CNG available and demand is far lower in comparison. On other technologies, I think electric vehicles are a no go for a long time. Hybrids, however, have a potential provided the cost comes down.

Investment in R&D is seen to be lagging in India, though companies are growing rapidly. What is your take on this?

R&D does not give returns in the short-term and it is a fairly large sized investment. Small companies will find it hard to invest in R&D, because the money has to largely come out from their own retained income. It’s too risky to do R&D from borrowed funds, because it is tough to guarantee a payback. Some companies such as those in pharmaceutical sector do invest, but compared to their international counterparts most companies in India are very small.

However, going forward we will have to develop our own products to be able to compete as getting products from elsewhere will get more harder. Today, foreign companies are not willing to share their expertise, unless they have control over the project. Maruti has now started developing its own capabilities on par with the Suzuki R&D in Japan, only after Suzuki acquired a controlling stake in the company. This is the first Suzuki R&D centre outside Japan.

How important is Maruti Suzuki to Suzuki Motor Corp’s global operations? How will you look to leverage your local R&D capabilities?

The Indian business is extremely important for Suzuki. Today, Maruti produces and sells more cars in India than Suzuki sells in Japan. It is still not bigger than the total production – because they export high volumes. This year, Maruti will make 1.25 million vehicles. In terms of volumes, Maruti Suzuki represents around 30 per cent of global sales of Suzuki, but in terms of profits, it is higher at 50-60 per cent. In 2009, Suzuki was one of the few Japanese auto companies to show profits and this was largely because of the Indian operations.

We set up the R&D because India needs to develop products more specifically suited for the Indian market. Japan does not have the capacity or the resources to pay exclusive attention to products for India. Plus, it’s costlier to do it there and there is a shortage of manpower.

Few European OEMs are believed to be lobbying for lower import duties on CBUs, especially in the India-EU FTA. What is your view on this?

There are different aspects to this. As far as small cars are concerned, we’re not bothered because we’re far more competitive and everyone is now setting up base here. The issue is for bigger cars where the volumes are small and it doesn’t matter to us because small cars are our bread and butter. I think although there will be growth in sedans, the volumes won’t be very large even 10 years from now. We will remain a small car market.

The question is also that how much would one want to encourage big cars in India as a policy matter, especially from the environment point of view. We are trying to set norms for greenhouse gases and Government is soon going to issue fuel efficiency labelling norms.

The excise duty differential highlights the fact that the Government wants to push small cars. Even if import duties are removed, it will still be cheaper to import from Europe because of the high volumes manufactured there. In fact, big cars made in India are more expensive than the same model sold in Europe, because of the low volume of components made here.

Maruti Suzuki New models in 2011

admin — Fri, 24 Dec 2010 02:26:15 +0000

Maruti Suzuki New models in 2011

(1)New Maruti SX4 diesel ready to be launched in early 2011.Maruti Suzuki India (MSI) Managing Executive Officer (Production) M M Singh said in a statement given to PTI, “The production of a 1.3L diesel engine with turbo charger is going on and we will start assembling it in SX4 once our plants reopen on January 3 next year after the annual weekly maintenance shutdown

(2)We expect the SX4 Diesel to be priced very competitively at around INR 50,000 more than that of the petrol version

(3)SuzukiFan expect Suzuki use a newly diesel engine that develope entirely by Suzuki

(4)Maruti Suzuki Kizashi ready to be launched in India by march 2011,Money control reports that the Kizashi will use 2.0 liter petrol engine and will prices between 13-15 lakh while other source reports that Kizashi will get Japan’spec 2.4 liter J24b engine if there a later engine suzuki fan expect to prices between 15-18 lakh.

(5)Next generation Suzuki Swift will debute by next year

(6)Money control reports that Suzuki will have revice small suv in 2011 but suzukifan dont’ have news about this yet.

(7)If there is an exponential growth in the Indian car market next fiscal year, we may see a dip in our market share. We are taking all steps to enhance production to keep our share intact. We have plans to maintain the current market share if the domestic car market develops to around 40-50 lakh cars by 2015. If it goes beyond 60 lakh units-a-year, we may face difficulty in keeping this high share,” Maruti Suzuki MD S Nakanishi said on Wednesday.

(8)Maruti is setting up two new plants on Manesar in Haryana with an investment of Rs 3,750 crore that will take its installed production capacity to 17.5 lakh units by 2013. The company will also reorient its production and shift the entire assembly of its sedan Dzire to the Gurgaon plant by July next year

(9) Besides, the company will also be considering a diesel variant of its proposed multi purpose vehicle (MPV) ‘rIII’, which is scheduled to hit the roads in 2012.

(10) Around half the 7,600-strong workforce is going through multi-skill training, so that they can assemble three to four different models of cars, rather than specialise in only one. “We are rotating workers between different units, so that they can assemble different models in our product range. This gives us flexibility in production,” M M Singh, managing executive officer (production) added.

Admin with source from Money control,oneindia and ET

Maruti Suzuki Anticipates Sale Rise By 31% but market share to decline next year If there is an exponential growth

admin — Fri, 24 Dec 2010 02:06:13 +0000

Maruti Suzuki Anticipates Sale Rise By 31% but market share to decline next year if there is an exponential growth

(1)MSIL is expecting up to 30 per cent sales jump in the domestic market during this financial year.
“We are expecting domestic sales growth of 28-30 per cent in this fiscal. Last fiscal, we sold about 8.7-lakh units,” said MSIL Managing Executive Officer (Marketing and Sales) Mayank Pareek.

(2)Maruti Suzuki bases its claim on the growing Asian economy and demand for its products. Earlier in September this year, maruti suzuki had indicated that it might meet the sales rise by 18% by selling 1.2 million units.

(3) CEO said its market share may fall in the next fiscal year beginning April due to capacity constraints even as sales rise across the industry.

”If there is an exponential growth in the Indian car market next fiscal year, we may see a dip in our market share,” chief executive officer Shinzo Nakanishi, told reporters today in New Delhi.

(4)According to MSIL Managing Director Shinzo Nakanishi “with de-bottlenecking of operations, the carmaker is aiming to produce 10-lakh units each at its Gurgaon and Manesar facilities in future. We have already ramped up production by about 10 per cent to nearly 1.10-lakh units every month from October this year, taking its total annual output to 13-lakh units in 2011-12.

(5)It is also planning to launch its luxury sedan Kizashi early next year, which could be assembled at the Gurgaon facility depending on the demand. The company will also be considering a diesel variant of its proposed multi-purpose vehicle (MPV) ‘rIII’, which is scheduled to hit the roads in 2012.

(6)Managing director Shinzo Nakanishi admitted on Wednesday the company realises that its absence in the SUV/MPV segment — which accounts for roughly 18% of the market — was proving to be a challenge.

“We have Grand Vitara and the Gypsy but these models sell very little … we are studying this market closely, especially after displaying the RIII concept at the Auto Expo. The existing line-up of cars is not enough,” Nakanishi said

(7)The Kizashi will be pitted against well-entrenched brands such as Honda’s Accord and Civic and Toyota’s Camry and Corolla Altis.
Maruti is not looking at large volumes from the car initially. All it wants to do is enter an aspirational segment to have a wider product portfolio and a chance to study the behaviour of premium customers, Nakanishi said.

(8)The entire assembly of Dzire will be shifted to Gurgaon by around July next year, while the Swift — which is currently made at both the plants — will be shifted entirely to Manesar.

(9)Currently, Maruti makes about 10,000 units of Dzire and 12,000 units of Swift every month but both these models continue to have long waiting periods — 3-4 months for Swift and 4-5 months for Dzire.

(10)”Our plan is to fully shift DZiRE to Gurgaon and Swift to Manesar to enhance productivity. The shifting of assembly of DZiRE will take place by July next year and that of Swift will take place in future,” MSIL executive officer M M Singh told PTI.

Admin with source from The hindu,dnaindia and domain-b

Q&A: Hiroshi Nakagawa, Managing Director, Toyota Kirloskar Motor

admin — Wed, 08 Dec 2010 06:28:32 +0000

Q&A: Hiroshi Nakagawa, Managing Director, Toyota Kirloskar Motor

Toyota Kirloskar Motor will, over the next 45 days, open around 30 dealerships for a smooth roll out of its much publicised compact car, the Etios, as well as the Etios sedan, to be launched in the presence of Akio Toyoda, president and CEO, Toyota Motor Corporation. Managing Director Hiroshi Nakagawa, spoke to Swaraj Baggonkar on TKM’s plans. Edited excerpts:

The Etios is expected to be priced very competitively, without compromising on quality. On which areas were you able to cut costs?
Quality is our top priority and, at the same time, the Indian customer is very keen on cost and price. We have taken a lot of initiatives with (component) suppliers for a technical breakthrough, like how to reduce the weight of iron while maintaining its strength.

Was there any difference between the development process of the Etios vis-a-vis what Toyota practises overseas?
The processes were not much different. A car is a complicated and difficult product. There are many processes there but we cannot compromise just because costs are lower here. Our engineers had to innovate for achieving breakthroughs.
How important is the success of the Etios for Toyota in India?
Toyota is watching the Indian subsidiary (to see) if the Etios succeeds or not. Because, most main markets such as Japan, the US and Europe are saturated. Some are even declining. The growing market is very limited. China is very rapidly increasing but in future there is a question mark on it, but India is the kind of star and focus market.

Are you working with your suppliers to trim costs further?
From the very start we have fully involved the component makers on a one-to-one basis and faults have been resolved through constant communication. We have worked together on every aspect. We presently have 100 suppliers and are looking to expand that number.

After the Etios, will the Indian suppliers be assigned on some of your global projects?
It is possible to involve them. However, on an average, Indian auto component manufacturers do not meet the standards required for international projects. Some suppliers have already reached the standards set globally, while some haven’t.

Can the development model of the Etios be replicated elsewhere by Toyota?
A project is presently undergoing development in Brazil. So, we communicate to various markets that the Etios is the world’s first and not just India’s first, and that our development experience and techniques can be extended to overseas markets. Currently, the Brazilian subsidiary of Toyota is also working on the Etios and will launch the car in two years.

How many engineers were working on the Etios and how much time was required?
There were about 2,000 engineers who have worked on the Etios model, of Indian and Japanese origin. This project had started in 2006.

What are the combined volumes you are looking for?
We are looking at producing and selling 70,000 units of both in 2011.

What are the sales volumes of the Prius (hybrid)?
We had not launched the Prius with the intention of volumes, but to promote the idea of Toyota’s advanced technology. We have sold close to 100 units of the Prius since its launch in March. We get the Prius from Japan against confirmed orders.

Source:business-standard

RC Bhargava, Chairman, Maruti Suzuki latest interview

admin — Tue, 12 Oct 2010 03:00:16 +0000

RC Bhargava, Chairman, Maruti Suzuki latest interview

In an interview with ET Now, RC Bhargava, Chairman, Maruti Suzuki, talks on a number of issues including the company’s current volumes, their strategy for giving discounts, price hikes and competition. Excerpts:

Your volumes month after month have been in excess of 1 lakh units. Is that the new normal for Maruti from here onwards?

The 1 lakh mark has been crossed and I do not think there is any going back below 1 lakh unless of course something very unusual happens and the market goes down again like it did in 2008. But there are no indications of that happening and 1 lakh plus will remain the norm now.

Maruti, even though there is a waiting period, has always maintained smart discount for its customers. Will that strategy continue?

Some of these discounts are given basically to do promotions of specific models. Discounts are not a normal part of sales especially when there is a shortage and there is a waiting list. Really speaking, there is not too much sense in a discount. But as was said in the press conference yesterday, there is an expectation of customers during the festival season that they will get discounts. But what our marketing people clarified was that discounts this year will certainly be less than last year because of the waiting list. It does not really make much logic to give discounts.

There have been some concerns in the market when it comes to the recent yen movement as well as the element of royalty with Maruti. How much is a 12-13% rise in the yen that we have seen since May likely to impact Maruti? Also, are you sure that the royalty payment would not be higher than 5% that we saw in the first quarter?

The yen of course has been a matter of concern for us. Fortunately, the yen is a little bit weaker now than what it used to be a month or 2 months ago because the Japanese government did intervene and against reaching levels of 80-81 to the dollar, it is now running 83-84 to the dollar which gives us a little bit of respite.

As far as the royalty is concerned, the rate of royalty is fixed. I do not see any reason why it should change materially from what it has been in the past. The royalty rate is the same, the method of calculation is the same and only to the extent that the yen could affect it or if we localise more – there is not much scope for localization. Higher localisation of course means a slightly higher royalty amount, but then it means a lower cost of production. So overall, it would not adversely affect the bottom line.

You are already operating at peak capacity which is 100%. Can you take capacity utilisation to 110%, even 115%?

Actually we are running at something close to 130% because the installed capacities and what we are getting out of them are really quite different. With the same capacities – in terms of installed equipment – last year, we were making 86000 cars a month. That was the average of the million – 20000 – which we produced last year.

With the same fundamentally equipment without any new production lines being added, in October, we expect to produce 110000 cars a month which means that we would have gone up by about 26000 cars compared to last year’s average and that really reflects the higher utilisation of capacity. Partly it is due to greater productivity, more efficiency and partly it is because people have made some greater balancing of equipment, better utilisation of assembly lines. Also, it is because they have used some other means of increasing production like using some manual assembly, bypasses and things of that kind.

The price hikes that Maruti has undertaken have been relatively restricted vis-à-vis the kind of price hikes undertaken by your peers. Would that also entail eventually that the margins would not be as much of a bump up when it comes to Maruti?

We have really not felt the need to increase prices in the way some people are doing because the pressure on cost is really not that much. The fact that we are producing about 25000 cars now more than what we produced last year each month helps in actually reducing cost and improving our margins because the fixed costs have not changed much and production has gone up significantly compared to last year.

So with those factors, we do not see the need really for the price increases. We could in the context of the shortage situation and waiting list, but the policy of Maruti has always been that even when there are shortages, even when there are waiting lists, we do not increase price to take advantages of shortages.

What I understand is that as a policy you always negotiate your commodity long term contracts on a half yearly basis and what I understand is that your next negotiation is during December. Are you looking at significant amount of raw material advantage when you renegotiate your cost again?

The main contract which affects us is steel prices and steel prices have been fluctuating. But the major upward pressure on steel pricing has ceased and the next price negotiation should more or less be fairly reasonable in terms of any increase or decrease. I do not see very much happening in that sense. Talking about the other prices, we do not really have 6 month contracts on things like aluminium or copper or things of that kind, but they are done periodically. Some of it is spot buying. But the situation is that overall, commodity prices at the moment are not a real concern.

We have been hearing that various arrangements could be worked out between Volkswagen and Maruti in terms of Maruti manufacturing for Volkswagen. What is the most likely scenario or is there a scenario like this at all which is in the making?

At the moment, we just do not know. All policy discussions between Suzuki and Volkswagen take place either in Hamburg or in Wolfsburg. Nothing happens in the policy decision which involves us. In Maruti, we do not get involved in the policy making decisions. Once some policy is made – and nothing has been made as yet – and if they involve us in the implementation of those policies, at that stage we will get into discussions to see exactly what we need to do, how to do and what we can actually do.

So what is the last update on the Volkswagen issue from your parent Suzuki?

What we know is that they continue to have periodic talks. Beyond that, there is nothing further of any substance or significance to us.

For Maruti, the fear is that competition will intensify and it will intensify especially next calendar year – that is the time Toyota would be hitting out their first small car model. Is that a challenge for you?

Toyota of course is a challenge. Toyota is a very strong company and slightly less – but not less challenging – are companies which are already in the market. Honda is a very strong company, Hyundai is a strong company and when Ford and GM come, they are global giants. So competition has been there, will be there and we have to face competition. But so far, we have not done badly.

Despite our increasing production to the extent that we have, we still are running with fairly high waiting list. So the Indian customer of course likes to buy cars which are of the current technologies and which give him better performance, but he has also seen that Maruti is up to current levels of performance and technology. There is a lot more confidence in our brand which helps us in selling cars and keeping our market share.

What really has been the rationale behind the calculation change that you have made for arriving at your market share? Are there any benefits that you derive out of this?

No, it is not benefits. The market share does not in any way affect anything operational. It is just a means of knowing how we are doing in the market which does not have much relevance when you are short of capacity, when you are selling everything which you can produce, when you are trying to increase production to the extent that you can stretch all the production facilities. At that point, market share is just a derived number. There is nothing we can do about it.

If we were not selling all that we had, if we had spare capacity and we were losing market share, one would worry about it. But in the current situation, this market share calculation and how you calculate whether you take segment A+B+C or A+C and whether the figure is 52% or 46% is really academic. It has no operational or management value at all.

The Alto platform has worked like a charm for Maruti. What is the scope that you would be migrating from the Alto platform and could you announce that news very soon?

I do not see any reason why the Alto platform should be given up at this point of time or that why we would make any such decision. I do not see any merit in that at all. It is a very successful model. We have just launched the K10 engine on that model. It has been hugely successful in the marketplace. There is a great demand for the K10 Alto. Why would we suddenly announce discontinuance of such a model or such a platform?

Source: economictimes

Maruti Suzuki chairman RC Bhargava interview with CNBC-TV18

admin — Wed, 08 Sep 2010 01:31:56 +0000

Below is a verbatim transcript of Maruti Suzuki chairman RC Bhargava interview with CNBC-TV18’s Latha Venkatesh and Anuj Singhal.

Q: You all have had a fairly strong first five months of the year. Is that what is inspiring the confidence for capacity expansion? Give us some details of what is on the anvil?
A: That’s not the reason because this has happened now. We have been seeing that since last year the Indian car market has been growing strongly. All the factors seem to indicate that both the economic growth and along with the growth of the car industry will continue at a fairly high rate in the coming years. That is why we had gone ahead with our second line which is now under implementation and which will get commissioned at Manesar in the second half of 2011-12.
What we have now got also is in-principal approval from Suzuki Japan, to go ahead and take up in the board the approval of the third line also in Manesar. This will mean that the second and third line which will come up in Manesar, will add half a million cars of installed capacity.
Usually we expect that with half a million installed capacity, our people will ultimately produce 600,000 to 650,000 cars out of that. That is to take care of possible increases in capacity. At the same time as Mr Suzuki mentioned, the first original line in Gurgaon has gone quite old now and the time is coming when that one will be required to be scrapped and a new line built.
Whilst that happens then we need some surplus capacity from somewhere else otherwise we will run short of capacity again. That’s the other factor which is driving this. We also came to the conclusion that doing civil work for the third line along with the second line, was in all ways the right solution, both in terms of cost as well as in times of keeping dust and other levels down. So there is a technical reason also.

Q: Can you give us some kind of a timetable? How much of excess capacity comes in when the second line goes into operation in the second half of next year and what is the capacity that the third line will add? Would 2012 be the year when you will have this entire half a million capacity coming in?
A: We don’t know the exact timing yet because while the civil works are being started and they will be ready quite soon after the second line is commissioned. The board has yet to approve the third line and then the orders for equipment have to be placed. We have to check with the order and the suppliers as to what is the delivery time they will quote to us. There is a little bit of uncertainty there but usually I would expect that probably by the end of 2012, I can’t predict the exact time but something around that time.

Q: Right now your sales rate is about 100,000 units per month and your capacity is about 1.2 million. You are almost running at peak capacity. When this new line comes in what could be the sales guidance in terms of volumes per month. Would it increase significantly going by the demand situation right now?
A: This will increase our capacity by 250,000 a year, but it’s still a full year from now before we even start on getting anything out of this line. It will be only early 2012 that all the facilities will get completed. Now there will be a growth in this period which could be anywhere from 12% to 20%, I don’t know what the growth will be. The existing 100,000 per month will any case go up to something like 115,000-120,000 in one year’s time.

Q: Rs 1900 crore is not a great deal of money especially if you have a timeline of over a year. Any plans of how that money is raised? Is it internal accruals only?
A: We have at this point of time over Rs 7,000 crore of cash available with us and we add something close to Rs 3000 crore a year of internal resources every year. No, we will raise nothing from outside.

Q: Do you think this will become the catalyst for more such expansion news that will come from others in the industry as well. After all capacity constraint is there and especially among the components makers. Do you see this generating some expansion announcements in the component industry at least?
A: The components industries must take note of what we are doing and expand along with us. Otherwise there will be problems. If we create half a million extra capacity in the next two years and this doesn’t happen with the component manufacturers then there is an issue.

Q: One issue which has bothered investors after your quarterly numbers was the royalty issue. There is still no clarification on that in terms of when is that going to end. There was some talk that maybe three-four years down the line, you may actually develop your in-house technology and may actually get royalty from Suzuki. Can you take us through any timeline on that front?
A: What we have yet to work out with Suzuki is that when models are developed partly in India and partly in Japan, then how the royalty will be adjusted to take into account the work done in India. That discussion will take place but as you know developing models in India will still take some time off.
The Rohtak plant at the moment only has a boundary wall. It doesn’t have much more than that. Test track and other facilities are yet to be developed in Rohtak. This will of course happen. It will be illogical if one was to say that work will be done in India but royalty will be paid for that, that won’t happen of course.

Q: For rest of FY11 and FY12 we can assume that the royalty according to what happened in the first quarter?
A: The first quarter had an arrear component in it also. The arrear component has to be excluded because that won’t arise in the future. But the amount of royalty to be paid will depend on the volume of production which takes place and to an extent it will be determined also by the exchange rate.
Q: The yen is becoming an expensive currency?
A: Yes, but I don’t know how the yen will behave in the next 12 months.

Source: CNBC-TV18’s

Question and Answers With Suzuki CEO in Latest Visit At Maruti Suzuki

admin — Wed, 08 Sep 2010 01:12:53 +0000

Osamu Suzuki on in an interview with Sindhu DNA. Excerpts:

On the Volkswagen deal and the strategy to operate two brands, VW and Suzuki
Volkswagen bought a 19.9% stake in Suzuki for a certain amount. Half of the proceeds will be used by us to buy shares in VW. Till date, we have acquired 4 million VW shares and plan to take up our stake in that company to 2% (not larger because the equity base of that company is very large). The remaining 50% money will be used by us to buy equipment.

On joint product development between VW and Suzuki
Let’s be very clear that there will be no selling of each other’s vehicles. Before we get to joint product development, common components have to be developed. That would be the starting point. No, a concrete plan isn’t ready yet on this. It is wise for Suzuki and VW to jointly develop components for vehicles which sell large volumes. VW is selling greater volumes in China so Suzuki can use components from China through VW; this will bring down costs. But whether Suzuki makes common use of VW in China of VW uses Suzuki to source components from India … there has been no discussion between the two partners on this as of now.

On whether Maruti will look to alter shareholding in component companies in India under the joint sourcing plan with VW
We are not thinking of either increasing or decreasing stakes.
On the contours of joint product development with VW
In case we do joint product development, then these products would be sold globally. Of course, vehicles we sell together in US, Europe, Asia, Indonesia, Thailand and Brazil will of course be different products.

On hiking stake in Maruti Suzuki
As of now we have a 54% equity and whether we will increase this or not will depend on investments in equipment. It could be increased or even decreased. We have not taken a decision as of now.

On the fate of Maruti-Nissan contract manufacturing alliance after VW became a shareholder
Globally, Suzuki is a contract manufacturer for four companies – Nissan, Mazda, General Motors and Fiat. But from India, we do this only for Nissan. In all these instances, Suzuki has a very good relationship with the companies that source vehicles from it. But for the Maruti-Nissan alliance, it is difficult for me to comment on what will happen in future. They (Nissan) should be willing to buy and we should be willing to make products for them.

On whether VW will become fifth company to source vehicles globally from Suzuki
Not as of now, but if in future VW wants to buy vehicles from us, we will decide the terms and conditions (for such a contract).

On whether capacity expansion is being done late in India
We can’t say that the capacity expansion announcement has come late or that demand has grown too early.

On whether Suzuki is working to develop new diesel engines
So far as the Fiat 1.3 litre engine goes, we have a contract. We continue to manufacture this diesel engine under license from Fiat, but depending on requirements in India, we will take a call (on whether to make new, different diesel engines).

On increasing competition in India, the arrival of the Tata Nano and Maruti’s future strategy
We have 12 models as of now and need to increase this number. We can see these either in terms of cc or classify them as hatchbacks, notchbacks etc. Our effort is to manufacture models which are saleable in India. We are not thinking in terms of cc. One more thing: we have no plans as of now to make a product smaller than 800 cc which is already available in India.

On how is Maruti contributing to Suzuki’s global sales and turnover
As of March 2010, Suzuki’s consolidated sales were about 2.5 trillion yen whereas Maruti’s topline was 600 billion yen. So Maruti’s turnover constituted about 25% of Suzuki’s turnover. In terms of sales, Suzuki sold 2.3 million vehicles globally last year of which Maruti’s contribution was a million units.

And Maruti’s weightage in Suzuki’s portfolio will only increase in future because of exchange rate fluctuations and a stable rupee-yen relationship. But Suzuki is also building a Rs 1,925 crore plant in Thailand which comes on stream in 2012 so Maruti’s weightage may change yet.

On his own forecast for India’s car market size in next few years
If Suzuki were the lone car maker in India, we could have predicted growth. As of now, we see annual growth rate of 10% but growth is quite rapid for India so very difficult for us to give an estimate.

On product strategy globally and for India in the medium term
Right now we are focused on 1000-1300 cc space. But if there is demand for bigger vehicles in India going forward, then we will make them.

On his succession plan at SMC now that he has turned 80
I am healthy yet so will continue (to head the operations).

Source: DNA