Business - Maruti's way forward

Maruti Suzuki which controls slightly over half of the domestic car market in the country has said that it would design small cars suitable for the Indian conditions as a strategy to beat the stiff competition with the entry of global auto makers.

It would be launching compact cars with more features to meet the needs of the customers locally.

In its annual report released on Wednesday, the company’s Chairman, Mr R. C. Bhargava, stated, “The car market is growing increasingly competitive. This is not surprising as global manufacturers are bound to come where they see a growing market. Maruti has a strategy for the future.”

He said that the company would capitalise on Suzuki’s research and development capabilities and internal resources to finance its expansion, thereby cushioning itself from the higher interest rates and borrowing costs and become cost competitive.

Maruti is also betting on a faster growth in the small car market as fuel prices trend upwards boosting demand for such models worldwide.

The Indian small car market is set to witness a plethora of compact models being launched starting from Tata Motors’ much awaited ‘Nano’ to foreign players like Honda, Volkswagen, Toyota who are also either customising their existing model or launching a new model to cater to this market.

Explaining the company’s plan to stay away from the ultra low-cost segment, Mr Shinzo Nakanishi, Managing Director and CEO, said, “With growing incomes and aspirations, Indian consumers have exposure to global design. Most of them would want compact cars to be more stylish, loaded with features and superior engines and at least as reliable and fuel efficient as their earlier cars. We would meet the needs of these customers.”

The company’s annual report also emphasised its growing focus on the export market. Maruti Suzuki is looking to make India an exclusive base to manufacture small cars for Europe.

“We want to export 2 lakh units annually by 2010-11. At that time our target for the domestic market would be to sell one million cars for which we are expanding capacity,” Mr Nakanishi said. In the fiscal 2007-08, Maruti exported 53,000 units, the highest ever till date.

The company, however, painted a bleak picture on its outlook in the current financial year in the domestic market on account of US economy slowing down and high crude prices which has led to inflationary pressure globally.

It has also expressed concerns over interest rates and tightened money supply.

“The general expectation is that industrial growth including sale of automobiles will be adversely impacted. The company posted a 12 per cent increase in domestic sales in the first quarter of the current fiscal and will continue to make all efforts to maintain a reasonable rate of growth,” the company outlined in the report.