Business - Maruti not getting into sub-Maruti 800 segment

Maruti Suzuki is already helping realise SMC's global aspirations. What is Maruti's contribution to SMC's total sales at present and how do you think it can be increased going forward? What is the target for Maruti vis-a-vis Suzuki sales ambitions over the next 2-3 years and by when do you think Maruti will surpass SMC in production as well as sales?Yes, you have very rightly said that Maruti Suzuki is contributing to SMC's global aspirations. In terms of overall contribution, Maruti Suzuki currently contributes 30% to total sales. Going forward, Maruti Suzuki is ready to play even greater role in Suzuki's global operations. We have set an ambitious target for ourselves — to sell one million units in domestic market and export another 2 lakh units. This includes one lakh units of A Star, SMC's next world strategic model. All this in just two years from now, I mean, by 2010-11. By the same year, Suzuki aims to sell 3 million units worldwide and one third of this will be contributed by Maruti Suzuki. To reach this level and fulfil our own as well as parent Suzuki's ambitions, we have taken up a long-term plan. The plan takes into account scaling up Maruti Suzuki's strength in many areas. Maruti and Suzuki are investing Rs 9,000 crore for expansion of capacity and infrastructure. We have already set up a new car plant and a diesel engine plant; currently their annual capacities are being scaled up to reach 3 lakh units each. We have two new world strategic models in the pipeline — A Star and Splash. A new, next generation petrol engine has been developed and a plant is being set up at Gurgaon. This new 'K series' engine will power the A Star and subsequently many from our existing range of models. To enhance infrastructure for exports of 2 lakh units, we have formed a joint venture with Adani group and are setting up a dedicated car terminal at Mundra port. Central to all these activities is our customer. While next generation models and engine technology are being introduced, this itself will not be sufficient, if we do not approach customer with a fresh focus and deliver a new experience. For this, we are investing in marketing and sales infrastructure. Across the country, we are setting up regional vehicle stockyards, spare parts centres and company-owned display centres. This is in addition to expansion of our sales and service network substantially in coming years. Another critical area is talent and capability development of people in Maruti Suzuki. During the Maruti public issue in 2003, SMC chairman O Suzuki had announced that Maruti Suzuki will be developed as SMC's R&D hub outside Japan. The work in this area started five years ago when Maruti engineers began to participate in live projects at Suzuki's R&D facilities in Japan. Now, we are setting up a dedicated R&D hub. This will provide necessary infrastructure and will be an aid for nurturing in-house talent and full model development capability among Indian engineers. Already, we have started hiring engineers. The engineers count has gone up from 269 in March 2007 to 571 now, and our target is to take their strength to 1,000 engineers in the next two years. Will a time come when SMC will develop and build a car from scratch in India, for India and only then think of taking it global? Of course! With all infrastructure in place and rich past experience in model development, our engineers are picking up capability to develop full model changes. This is through working on live projects at the SMC R&D facilities in Japan. Our engineers are all gearing up to develop capability in this regard over the next 2-3 years. Now as for taking it global, let us focus on development first, we will let you know about its marketing when the time comes. By when do you foresee India becoming the biggest market for Suzuki globally both in terms of value and volume? Please provide numbers, if possible. We already are. Maruti Suzuki contributes around 30% to Suzuki's global sales. MSIL's contribution to SMC in terms of profit is presently around 34%. This makes India operations an important subsidiary company for SMC's global operations. You have already acknowledged that Maruti's domestic market share will suffer because of impending low-cost car launches. Does this scenario push SMC to alter its strategy (it has been seen as a small car maker till now) and push for sedan instead? DZire and SX4 have already demonstrated your desire to be seen as a complete car company; what do we expect from Maruti in the near future on this front? Will M800 remain the smallest car from Maruti stable in the times to come? There seems to be a misunderstanding. My point is, we have capacity for a million cars. Assuming the total market of 2 million cars in 2010-11, we can have a market share of 50%. But if the market goes beyond 2 million, either due to low cost cars or for other reasons, then in mathematical terms, we will be lower than 50%. But you are right to pick up that we desire to be seen as a manufacturer offering the full range of models, though our focus will remain on small cars. This is in line with Suzuki's thought and global positioning. Swift and now SX4 are examples. But the success of Swift DZire and SX4 does not mean that we are pushing for sedans instead of compacts. On the contrary, our focus on compact cars will continue and intensify. Two launches are already planned (A Star and Splash) to add to our compact car model offering in India. While compacts will remain our strength, the success of our latest sedans has gone well with Suzuki's thought on new image. As for new models in sedan segment in near future, I would not want to share any segment specific detail at this stage; all I can say is that we have many models and upgrades in pipeline. But we are not going to get into sub-Maruti 800 segment. The current situation in the domestic passenger car market is dim. Does this alter, in any way at all, your forecasts for sales for the current fiscal or your plans for capacity expansion? Is there a slowdown on any investments already planned? We have to accept these macro factors as given. Our plans remain on course. Recruitment, network expansion and capital investment is as per plan. There are no cut-backs of any kind in these areas. At the same time, we are taking several measures within our operations to minimise the impact of the current macro factors. l Our cost reduction programmes will help us reduce the impact of higher commodity prices to some extent l We have enhanced the focus on VA-VE programmes, and started new campaigns like 'one gram, one component' through which we will reduce weight and drive efficiencies. l We are also examining reduction in fixed costs. l In an overall subdued market, our models Swift and DZire continue to show strong demand. We are making efforts to step up the production of these two models and meet customer orders. l At a time of high fuel prices, the fuel efficiency of our models is a competitive edge, and we are communicating this aggressively through national campaigns and field events. l Although demand sentiment is currently subdued, there are potential positives like salary hike for government employees, reduction in income tax and strong rural demand on account of a good harvest. We are geared to take advantage of these opportunities. l We are looking forward to our exciting new model A Star, which will be launched by the end of this year. By then, the company will have a total production capability of one million cars. l While we remain positive for the long term, our effort in the short term will be to do all we can to minimise the impact of external factors. Maruti was to sell 50,000 units of the 'A Star' to Nissan initially, but has this deal been sealed yet? Is there a rethink on the number? There is talk of SMC being interested in partnering Nissan and Renault in their Chennai-based manufacturing project. Is this true? Please explain with details since Nissan's flip flop on a sourcing deal with Suzuki earlier has led to intense speculation on what kind of deal (if any at all) will emerge between Suzuki and Nissan on even the 50,000 units agreed earlier. Media friends like you keep quizzing me on this question and my answer remains the same every time. Once again, I will not comment on Nissan and Suzuki's behalf as it is not appropriate. What is Maruti's strategy for alternative fuels, the diesel market and development of future options such as hybrids and fuel cells? What is the company doing to set a 'green' footprint and offer consumers a low-cost car ownership and operation package? For alternative fuels — we already have three LPG variants on offer. As such, we are seriously addressing both issues — green car concept and low-cost ownership to customers. We are also working on CNG variants as another alternative fuel option. For diesel market, we want to increase our share there too. We are working on expanding our capacity for diesel engines at Manesar to 3,00,000 units a year. For hybrids and fuel cells, one has to evaluate the cost of technology and the benefits to customers. These technologies come at a premium but objective remains the same as with other alternative fuel options. We can achieve this objectives through many other ways — improved engine technology, weight reduction etc, besides developing technology that uses LPG and CNG as fuels. We have been working on this thought so far. In any case, Suzuki is globally working on fuel cell vehicles and hybrid technology that is suitable for small compact cars. SMC has few models powered by fuel cell technology, in Japan. These technologies may find their way into India also at an appropriate time.