GURU GOBIND SINGH INDRAPRASTHA

UNIVERSITY,KASHMERE GATE
NEW DELHI

“ANALYSIS OVER MARUTI UDYOG LIMITED”

SUBMITTED BY:
KANIKA PURI
ENROL NO: 02416608909
 CERTIFICATE

This is certify that this project entitled “ANALYSIS OVER MARUTI

UDYOG LIMITED” has been carried out for the sole purpose of
submission in the partial fulfillment, for Masters in Business Administration
(MBA-B&I) weekend course at University School of Management Studies –
GGSIPU, by Kanika Puri (Enroll no.-02416608909). The matter embodied
in this project is the result of my study and survey and has not been been
published anywhere before to the best of my knowledge and belief.

Project Guide:
Mr. Sanjay Dhingra

2
 ACKNOWLEDGEMENT

The satisfactions that accompany successful completion of any work would

be incomplete without the mention of the people who made it possible.
Preliminary, I would like to thank our institution fit and also other staff
members for giving me the opportunity to fulfill my aspiration.

With deep sense and regard I am thankful to our training guide Mr. Sanjay
Dhingra for his valuable guidance and remarkable patience in guiding our
work to its fulfillment. I wish to thank my parents for their constant
encouragement which is like snow, softer when it falls and longer when it
dwells upon, the deeper it sinks in mind.

I will be failing in my mission if I do not thank other people who directly or

indirectly helped me in the successful completion of this project. So, my
heart full thanks to all friends and staff of my college, who supported and
encouraged me in preparing this project report as best as possible.

Contents
1) Preface

3
 2) Company profile(Training center)
3) Training project(Maruti udyog ltd)

(Phase I)
Evolution of the Indian Passenger Car Industry
Maruti’s Entry into the Indian Passenger Car Markets
Domestic Car Market
Dynamics of Market
Car Market Classification
 Price Based Classification
 Length Based Classification
Maruti’s Offering & Competitors in Different Segment
Share of Segment in the Industry
Financials: Trend over the years
Factors Determining Competition in Indian Passenger Car Industry
Factors Affecting Demand for Indian Passenger Car
(Phase II)
Industry Overview
Evolution of Indian Industry
Global Passenger Car Industry
The Indian Passenger Car Industry
Sector Outlook
Future Scope
(Phase III)
 MUL’s Vision
 MUL, S Strengths
 Productivity & cost efficiency
 MUL’s Business Strategy
 MUL’s supply chain
 Research & Development
 Manufacturing process

(4) Refrences

4
  

5
 PHASE I

Evolution of the Indian Passenger Car industry:

During 1960s and the 1970s there were only two manufacturers in the
market, Hindustan Motors and Premier Automobiles with limited production
capacities. The import of passenger cars was restricted to the State Trading
Corporation (STC) and foreign diplomats.
During that period the passenger car industry in India grew at a nominal
CAGR of approximately 3.6%. The rate of customs duty levied on cars was
225%.
Today Maruti has more than 5 million satisfied customers in India and is
currently having a share of around 54 per cent in the domestic passenger car
market where most of the major international automobile manufacturers are
present.

Maruti’s entry into the Indian Passenger Car Market:

MUL was the result of the joint venture created in February 1981 between
Japan's Suzuki Motor Company and the Indian Government when the latter
decided to produce small, economical cars for the masses.

The intention of the venture was to produce a 'people's car'. To get the
project off the ground MUL took over the assets of the erstwhile Maruti
Ltd., which was set up in 1971 and closed in 1978.

It was on December 14, 1983 that MUL launched the first Maruti vehicle -
the Maruti 800. The first model was the SS80, a 796cc hatchback car priced
at Rs. 47,500.
Subsequently, in spite of price hikes, the car has remained within the reach
of the Indian middle class and has been a runaway success. Available in
vibrant colures when India's passenger car population comprised mainly

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Ambassadors and Fiats in black and white, M800 gave Indians the first taste
of global quality and reliability.

In late1980s, Suzuki increased its equity stake in MUL from 26% to 40%
and further to 50% in 1992, converting Maruti into a non-government
company.

In the years that followed, MUL consolidated its position with a line of
Indian classics, such as the eight-seat Omni, the rough-terrain Gypsy, and, in
October 1990, a 3-box Maruti 1000. MUL took the lead in the green drive
by launching its CNG-run Omni and Maruti 800 in 1999.
MUL redefined the premium compact segment with the launch of the Zen in
October 1993. It was the company's first 'world car, selling across multiple
markets. A year later, the Zen had won several awards, including 'No. 1 car
in Europe' (Auto Week, 1994),

'No.1 import in Europe' (1997) and 'most fuel-efficient car' (ADAC).

In 1999, MUL launched Baleno and WagonR. Baleno targeted the premium
mid-segment while WagonR was positioned as a multi-activity vehicle.

In1999, to improve customer satisfaction, it even established a chain of

model workshops and soon after, set up customer call centers in the metros.

In 2000, Maruti Suzuki introduced Alto - a premium small car targeting the
export market - and in October 2001, Versa, a multipurpose vehicle.

In May 2002, Suzuki took management control of Maruti.

In April 2003, MUL rolled out its latest offering, the Grand Vitara XL-7, a
luxury SUV imported from Suzuki Motor Corporation. The Grand Vitara
was a concept that was radically different from the models that comprised
the bulk of MUL's sales.

Since 1980 with its product excellence, operational efficiency and customer
intimacy Maruti Suzuki has been the leader in Indian passenger car market.
Main objectives of MUL as set forth in their Memorandum of Association
are:

1.To acquire and take over from GoI the right, title, and interest in relation
to the undertakings of Maruti Ltd. As\ provided for in the appropriate

7
enactment of GoI together with the liabilities of GoI so far as they are
related to the Undertakings of the Company.

2. To carry on the business of manufacturers of, and dealers in, automobiles,

motorcars, lorries, buses, vans, motorcycles, cycle-cars, motor, scooters,
carriages, amphibious vehicles, and vehicles suitable for propulsion on land,
sea, or in the air or in any combination thereof and vehicles of all
descriptions (all hereinafter comprised in the term “motor and other things”),
whether propelled or assisted by means of petrol, diesel, spirit, steam, gas,
electrical, animal, or other power, and of internal combustion and other
engines, chassis-bodies and other components, parts and accessories and all
machinery, implements, utensils, appliances, apparatus, lubricants, cements,
solutions enamels and all things capable of being\ used for, in, or in
connection with manufacture, maintenance, and working of motors and other
things or in the construction of any track or surface adapted for the use
thereof.

3.To carry on the business of garage keepers and suppliers of and dealers in
petrol, electricity and other motive power for motors and other things.

4.To carry on in the business of iron founders, mechanical engineers, and

manufacturers of machinery, tool makers, brass founders, metal workers,
boiler makers, mill rights, machinists, iron and steel converters, smiths,
wood workers, builders, electroplaters, chromium platers, lacquerers,
enamellers, painters, metallurgists, electrical engineers, and printers and to
carry on any branch of manufacturing and engineering business.

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 Dynamics of Market:
Initially Maruti was operating in the market which was the part of a closed
economy but with the opening of economy market scenario has changed
dramatically and is at an interesting juncture where both challenges and
opportunities are immense.

According to the statistics available, Indian car market is one of Asia's

largest and most competitive markets. Over 1,030,068 passenger cars, multi
and sports utility vehicles were sold during 2003/04 resulting in the market
growth of about 32%. With such immense growth opportunity the Indian
automobile market has finally caught the fancy of big players which are
eager to capture the India automobile market at any cost.

And as such Maruti is having a tough competition from the new players,
including Hyundai, GM and Honda of Japan.

In the last quarter of 1998 these new entrants in the market had launched an
unprecedented assault on the B segment of the market.

• Daewoo launched the Matiz

• Hyundai launched the Santro. Santro Xing specially created a fresh

excitement in the B segment.

• Telco launched the Indica

• Around the same time, Fiat slashed the prices of its Uno and launched a
Diesel variant. Hyundai has also launched Getz.

• General Motors is also planning to launch new variants.

• Fiat has reworked the engine of the Palio and is planning to launch another
B segment product.

• And then, there are Honda and Toyota.

• It is also predicted that Honda Motors India will be also launching its small
car, Life, in India.

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Along with the intense competition there are other factors which have made
the conditions worse for Maruti.

• After almost 18 years, the 800 is on its last legs. This is particularly
important as Tata Motors is serious about an entry-level car at Rs 1 lakh.

• Over the years, MUL's brand value had begun to erode. It is seen as a
small-car maker only.

• Maruti was having nothing to offer to the booming market for people
carriers in India - Sumo, Qualis, et al. For this segment Maruti launched
Versa. Launched as a higher end alternative to the Omni, it was expected to
click. But the Versa bombed. Launched with sales expectations of a
1,000units every month, it did about 100.

• The other launch, the Baleno, went up against the Hondas and the
Mitsubishis, and lost money from Day One.

• In an industry where cars get minor facelifts every year, a major reworking
every two to three years, and are replaced every four or so years, the Zen has
remained almost unchanged since 1993.

• It seems that even consumer are having problem equating Maruti with
premium.

• Since MUL had exhausted all of Suzuki's high-end products, it is finding

itself unable to cope with the frequent upgrades and relaunches.

• Even when the government's stake in Maruti has come down, the
interference will not decrease as seen with other institutions like VSNL and
MTNL.

• Considering Hyundai's emerging status in the Indian market and the lack of
government involvement, it could turn out to be a better pick than Maruti.

• Maruti is also facing problems linked to its higher end mid-sized (segment
C) models. Maruti's share in this segment has fallen from 30 per cent in
1999-00 to 16 per cent in 2002-03.Maruti currently has three cars in segment
C -- Esteem, Versa and the Baleno, of which the latter two have still to make
a mark.

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• Maruti Suzuki is also having great difficulty in keeping its profit growing
as A segment, in which Maruti Suzuki is the only player has margins as low
as 1-2% (Rs 2,000 to Rs 4,000 per car).
As a result in recent years Maruti Suzuki has been consistently been losing
out to other players like Hyundai and
Telco in the compact car segment and has been reduced to the marginal
player in all segments above B.
Talking in terms of absolute figures Maruti Suzuki's share declined from
61.2% in 1999 to 54.6% in 2003 and finally to 51% in 2005. Its volumes
have dropped from 3.53 lakh to 3.30 lakh even as total industry volumes
(cars and utility vehicles) have shown a compounded annual growth rate of 5
%.

Car Market Classification:

Before going further it is necessary to understand the Indian car market
classification and the segments in which MUL operates.
There are two principal systems of classification in the Indian passenger car
industry:

Price Based Classification

Price based classification is the widely accepted classification basis in the
Indian passenger car industry.
The different price segments used by Maruti were as follows:
1. Segment A – cars priced lower than Rs. 300,000
2. Segment B – cars priced between Rs. 300,000 and Rs. 500,000
3. Segment C – cars priced between Rs. 500,000 and Rs. 1,000,000
4. Segment D – cars priced between Rs. 1,000,000 and Rs. 2,500,000
5. Segment E – cars priced above Rs. 2,500,000

Length Based Classification:

In April 2002, SIAM introduced a new segmentation of cars on the basis of

the length of the cars, in order to establish a uniform industry standard. The
new segmentation of passenger vehicles is as follows:

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 1. Passenger cars

• Segment A1 (Mini) – cars having a length up to 3,400mm

• Segment A2 (Compact) – cars having a length of 3,401- 4,000mm
• Segment A3 (Mid-size) – cars having a length of 4,001- 4,500mm
• Segment A4 (Executive)– cars having a length of 4,501- 4,700mm
• Segment A5 (Premium) – cars having a length of 4,701- 5,000mm
• Segment A6 (Luxury) – cars having a length of more than 5,000mm

2. Utility vehicles

• Weight up to 3.5 tonnes

a) Seating capacity not exceeding 7 (including driver)
b) Seating capacity between 7 and 9 (including driver)
• Weight up to 5 tonnes
a) Seating capacity not exceeding 13 (including driver)
• Multi-purpose vehicles (Weight up to 3.5 tonnes).

Domestic Car Market

Classification of domestic car market of MUL.

Sales Units FY’07 FY’06 Change (%)

(Vol ’000) (Vol ’000)
Maruti 632 522 21%
Industry 1,159 948 22%

Major players in Automobile industry

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 Fiat India Automobiles Pvt. Ltd
 Ford India Automobiles Pvt. Ltd
 General Motors India Ltd
• Hindustan Motors
• Honda SIEL Cars India Ltd
• Hyundai Motor Company Ltd.
• Skoda Auto India Pvt. Ltd
• Tata Motors

Fiat India Automobiles Pvt. Ltd

 The latest joint venture between the car giants,

 Fiat Auto of Italy and India's oldest automobile manufacturer, Premier
Automobiles Ltd. (PAL) resulted in the formation of Fiat Automobiles
Pvt. Ltd.
 Which has manufacturing locations in 60 countries. This is a wholly
Indian subsidiary of Fiat Auto in which Italy holds a 51% share and
49% is with PAL.
 It was hoped that this new venture would produce cars which give
good performance, are beautiful and which would be suitable for
Indian conditions

Ford India Automobiles Pvt. Ltd

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• An American company manufactures & sales automobile world wide.
• A company was founded by Hanery Ford.
• Ford introduced itself in 1988 with its Escort models in 2001.
• Company is having capacity 100000 vehicles per annum.

General Motors India Ltd

 General Motors India was formed in 1994 as a result of collaboration

between General Motors Corporation and C.K. Birla Group of
Companies.
 Its total investment is to the tune of Rs. 300 crores, General Motors is
the worldwide leader in car manufacture, with a 17% share in the
world auto market.
 Its products are sold in over 170 countries, and
 its manufacturing base is spread across 43 countries and its annual
production is roughly 83 lakh vehicles

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 Hindustan Motors

• An Indian Company of C.K. Birla group

• Established by Mr. B.M. Birla found in 1942
• Has a joint venture with Mistubishi
• In 1954 launched its first car Ambesseder
• Serving the nation for over 50 years

Honda Motors Co. Ltd.

• The joint venture between India's Hero Group and Honda Motor
Company.
• Hero Honda became the first name in 80s in India to make and prove
a point that vehicles can be driven without any pollution.
• Most fuel- efficient and largest selling vehicles due to its advanced
use of technology and better services.
• Hero Honda has managed to achieve indigenization of over 95
percent, a Honda record worldwide.
• Glamout PGM FI by Overdrive Magazine and “Most Trusted
Company” , by TNS Voice of the Customer Awards 2006 .

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 Hyundai Motor Company Ltd.

• Hyundai Motor India Ltd. was established in 1996

• It is Korea's top automobile manufacturer, with it sales revenue
touching 8.24 billion in 1997
• It got planned to invest another $1 billion in this facility by the year
2001
• Awarded with the benchmark ISO 14001 certification
• Plant is capable of producing 1, 20, 000 cars and 1,30,000 engine and
transmission systems annually.
• Giving a strong competition to its rivals in the same segment

Skoda Auto India Pvt. Ltd

 Skoda Auto is a part of the international Volkswagen Group,

 One of the premium automobile manufacturers in Europe.
 Skoda entered the Indian market in November 16, 2001. Till date
 Skoda Auto has introduced twelve luxury models in the Indian market
including Skoda Superb and Skoda Laura.
 In 2005, the company achieved more than 25% market in the luxury
segment.
 In the same year, it had set up a network of 41 dealerships equipped
with 35 facilities spread across the country. The total sale was close to
27,000.

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 Tata Motors

• Tata Motors Limited is India's largest automobile company, with

revenues of Rs. 24,000 crores in 2005-06
• Second largest in the passenger vehicles, mid size car and utility
vehicle segments
• Over 3.5 million Tata vehicles is moving on Indian roads, since 1954.
Its manufacturing plant is located at Jamshedpur, Pune and Lucknow

100% share in segment -A & 42% in segment -B

The majority of the company’s revenue comes from the segment A

and segment B- the compact segment. This accounts for the 85%
of the total car market in India. These two segments generate more
than 90% of the revenue for the company.

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 Maruti’s Offering and Competitors in Different Segments:

MARUTI IN SEGMENT A
MODEL LENTH BASED
CLASSIFICATION
1. Maruti 800 A1:Mini
2. Omni Utility vehicles

( MUL has 100% share in segment A )

Maruti in segment B
MODEL LENTH BASED
CLASSIFICATION
1.Alto A2: Compact

2.WagonR A2: Compact

3.Zen estilo A2: Compact

4.swift A2: Compact

Competition of MUL in segment B

COMPANY NAME MODEL LENTH BASED
CLASSIFICATION

18
1.Tata Engineering &
Locomotive Indica A2: Compact
Company Ltd

2.Hyundai Motor Company Santro A2: Compact

Ltd.
I10 A3: Mid-size

3.Hindustan Motors Ambassador A2: Compact

4.Fiat India Automobiles Fiat Uno A2: Compact

Pvt. Ltd
Fiat Palio A2: Compact

5.Chevrolet spark A2: Compact

Maruti in segment C
MODEL LENTH BASED

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 CLASSIFICATION
1.Baleno A3: Mid-size

2.Esteem A3: Mid-size

3.Versa Utility vehicles

4.Maruti gypsy Utility vehicles

5.Sx4 A3: Mid-size

Competition of MUL in segment C

COMPANY MODEL LENTH BASED
NAME CLASSIFICATION
1.Fiat Fiat Siena A3: Mid-size
IndiaAutomobiles
Pvt. Ltd Fiat Petra A3: Mid-size

Palio Adventure A3: Mid-size

2. Ford India
Automobiles Pvt. Ltd Ikon A3: Mid-size

Ford Fiesta A3: Mid-size

Ford Fiesta A3: Mid-size

3. General Motors Opel Corsa A3: Mid-size

India Ltd
Opel Swing A3: Mid-size

4. Honda SIEL Cars City A3: Mid-size

India Ltd

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5.Hyundai Motor Accent A3: Mid-size
Company Ltd
Elantra A3: Mid-size

Getz prime A3: Mid-size

Verna A3: Mid-size

6.Mahindra and logan A3: Mid-size

Mahindra

7.Chevrolet Aveo A3: Mid-size

8.Skoda Auto India Skoda Fabia A3: Mid-size

Pvt. Ltd

9.Tata Motors Tata Indigo A3: Mid-size

Maruti in segment D
MODEL LENTH BASED
CLASSIFICATION

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 Grand Vitara Sports utility vichle

Competition of MUL in segment D

Company name MODEL LENTH BASED
CLASSIFICATION
1.Ford India Mondeo A5: Premium
Automobiles Pvt.
Ltd

2.Honda SIEL Cars Accord A5: Premium

India Ltd
Civic A5: Premium

3.Hyundai Motor
Company Ltd Sonata A5: Premium

4.Skoda Auto India

Pvt. Ltd Octavia A5: Premium

Skoda Laura A5: Premium

Skoda Octavia A5: Premium

Skoda Superb A5: Premium

5.Chevrolet Optra A5: Premium

Share of Segment in the Industry

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 70%
Segment Share in Total Industry Sales

6 5% 6 5%
60% 60%
56 %

50% 49%

40%

30%

22%
20% 19 % 20%
17% 17% 18 %
13 %
9% 7% 7%
10%
8% 7% 7% 7% 6%
3% 4% 3% 4% 4%
0%
2003-04 2004-05 2005-06 2006-07 H1 2007-08

A1 A2 A3 A4-A6 C

Compact cars - A1 and A2 have major contribution in total car

sales in India.

Market Share over the years

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 4.5
H1 2007-08 13.5
16
54.8
5.1
15.4
2006-07 16.8
54.6
4.31 15.92
2005-06 16.62
55.09
4.05 16.38
2004-05 16.01
54.48
2.7 14.29
2003-04 17.08
55.06

Maruti Hyundai Tata Honda

More than Half of Market share from past 20 years since 1986-87
25000 250000
198,480
20000 171,442 200000
147,043
19,322

132,910
15000 150000
110,200
RsMillions

RsMillions
15,620

90,810 90,630
10000 100000
11,891
8,540

5000Financials: Trend over the years 50000

5,420
1,460
1,050

0 0

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PAT Turnover
Mul, s financial trand of the year

Financial Performance FY’0

Rs. Million FY’07 FY’06 Growth
Net Sales (Rs 145,922 120,034 21.6%
Mn)
PBT (Rs Mn) 22,798 17,500 30.3%
PBT Margin 15.6% 14.6% 100 bps
Avg. Net Worth 62,291 49,157 26.7%
(Rs Mn)
ROCE 35.3% 34.7% 60 bps
PAT (Rs Mn) 15,260 11,891 31.4%
EPS (Rs) 54.1 41.2 31.3%

Estimated Financial Performance in

25
FY’08, 09, 10
MUL has also said that it would increase the capacity of its new manaser
plant to 3, 00,000 lakh units. MUL has set a target of incremental exports
1,00,000 units from this new plant.

Particular Mar 08E Mar 09E Mar 10E

Net sales (Rs Mn) 174730.7 213183.4 267642.5

EBITDA (Rs Mn) 23938.1 31764.3 40414.0

EBITDA (%) 13.7 14.9 15.1

PAT(Rs Mn) 17957.7 22291.2 27086.0

EPS (Rs) FV-Rs5 62.1 77.1 93.7

P\E(x) at Rs798 12.9 10.4 8.5

Factors Determining Competition in the Indian Passenger Car

Industry
• Price
• Brand image
• Product performance
• New model launches
• Distribution network
• After sales support.
• The availability of value-added after sales services.
Factors Affecting Demand for Indian Passenger Cars
Demand for cars depends on a number of factors. The key factors affecting
demand for passenger cars in India are:
• Fuel costs
• Prices of cars

26
• Per capita income
• Introduction of new models
• Incidence of duties and taxes
• The quality of road infrastructure.
• Availability and cost of consumer financing

27
 PHASE II
(Industry Overview :)

Evolution of Indian Industry

1,400,000

1,200,000

1,000,000

800,000
Volumes

OTHERS
600,000

400,000

200,000 MARUTI

-
1970-71 1975-76 1980-81 1985-86 1990-91 1995-96 2000-01 2005-06

Maruti instrumental in the Growth of Indian Passenger Car

Industry

The Global Passenger Car Industry:

The Global Passenger Car Industry is estimated to be valued at around 38mn

Cars and US$700bn in value. The highly penetrated market of US, Urope

28
and Japan have witnessed a slowdown in demand growth during the last
three years due to economic slowdown. Most auto majors globally have
therefore set their sight on the low penetrated market in developing
economies.

Global penetration statistics:

Country cars per thousand population

USA 800

Japan 700

Bangladesh 14

Sri Lanka 12

India 7

Demand Drivers

The key factors that determine demand for car:

 Household income level
 Product availability and access
 Product affordability
 Availability of finance.

Emerging Markets
Income level is one of the key factors affecting new car purchases. The
relationship between gross national income per capita measured in terms of
Purchasing Power Parity, or PPP, which is an indicator of the per capita
income, and the number of new car registrations per 1000 persons in various
economies, has been shown below:
As shown in the chart, in 2000, developed economies, such as US, Japan and
countries in Western Europe, with higher income levels, had higher levels of
new car registrations, while emerging economies, such as India and
China, with lower income levels, had lower levels of new car registrations.

29
With rising income levels in the emerging markets it is likely that the
number of new car registrations will also increase.

Share Holding Pattern of MUL

Implications of Global Trends on the Indian Passenger Car

Market:
As a result of rising household income and decline in interest rates, along
with current low passenger car ownership density, many global
manufacturers have entered the Indian market. India is generally believed to
have a high GDP growth potential aided by low cost of production and
availability of skilled manpower. The high rate
of growth in the sales of passenger cars in India is driven primarily by
growth in the sales of passenger cars priced below Rs. 500,000.

The Indian Passenger Car Industry:

30
Regulations and Policies Related to Indian Automobile
Market:
Over the years GoI has formulated various policies and regulations for the
development of the automobile industry in India.

New Automobile Policy

In March 2002, GoI announced the new automobile policy or NAP. The
highlights of the policy and its effects on the manufacturers are:

• Requirement of minimum levels of indigenization was removed.

• Requirement of minimum export commitments was removed.

• Up to 100% equity ownership in Indian companies by overseas

manufacturers was permitted.

• Fiscal incentives were provided for cars less than 3.8 meters in length in
order to establish India as the Centre in Asia for the export of small cars.

• Tax incentives, automatic approvals for investment by overseas entities in

Indian entities

• Confessional duty on import of equipment was provided to entities setting

up of automotive design firms n India.

Trade Regulations
The World Trade Organization (WTO), of which India is a member, does
not allow quantitative restrictions or QRs (such as import licenses and
import quotas) on foreign trade. Since April 1, 2001, all QRs on automobiles
are removed and imports of all categories of new and used cars are allowed.
In addition, GoI has imposed several Conditions on the import of new and
sed vehicles such as restrictions on the age and the residual life of the used
Car being imported, restriction on the port through which the imports are
allowed, requirements of certification from notified agencies regarding
various matters, requirements pertaining to the availability of spares and
Servicing facilities and a requirement that the used cars can only be exported
from the country in which they have been manufactured.

31
Environmental Regulations
The Environment Protection Act, Water (Prevention and Control of
Pollution) Act and the Air (Prevention and Control of Pollution) Act require
companies to obtain consents for emissions and discharge of effluents into
the environment. In addition, GoI notified norms relating to emission by
vehicles, age of vehicles and specifications about quality and sales of fuels.
These environmental regulations are increasingly driving technology
innovation in the passenger car market.

Environmental Policy
Under the NAP, GoI has announced the environmental policy for
automobiles. The policy’s key provisions include:

• Approval of Mashelkar committee report.

• Encouragement for cars using alternative fuel technologies like CNG and
electric batteries.

• Adoption of international standards for levy of road tax such as charging

higher tax for older cars, in order to discourage the use of old vehicles. At
present, road taxes are levied at the time of purchase and are based on the
size of the vehicle.
GoI has been developing a regulatory framework to reduce pollution from
cars, through a phased introduction of emission norms. The framework as
introduced by GoI, based on the recommendations of the Mashelkar
Committee Report, is as follows:

• Sale of only Bharat Stage II compliant cars in the cities of Mumbai, New
Delhi, Kolkatta and Chennai, as applicable from 2000;

• Application of Bharat Stage II norms are from April 1, 2003 to the cities of
Bangalore, Hyderabad Ahmedabad, Pune, Surat, Kanpur and Agra and from
April 1, 2005 to the whole of India;

• Euro Stage III equivalent emission norms are to be made applicable to the
cities of New Delhi, Mumbai, Kolkata, Chennai, Bangalore, Hyderabad,
Ahmedabad, Pune, Surat, Kanpur and Agra by April 2005 and Euro IV
equivalent norms by April 2010; and

32
• Bharat Stage II and Euro III equivalent emission norms specifying quality
of petrol and diesel that can be sold in various cities that become applicable
at the same time as the norms applicable to the sales of cars.

Mashelkar Committee Recommendations

The key recommendations of the Mashelkar Committee Report are as
followed:
• GoI should only decide the vehicular emission standards and the
corresponding fuel specifications without specifying the vehicle technology
and the type of fuel to be used;
• A roadmap for the implementation of vehicular emission norms and
automobile fuel quality;
• Vehicles running on alternative fuels, like di-methyl ether, bio-diesel,
hydrogen, LNG, CNG, electric and fuel cells, need to be encouraged, giving
the choice of fuel and vehicle technology to the customers; and
• Putting in place other cost effective measures, such as a comprehensive
inspection and certification systems for in-use vehicles with private sector
participation, fitting emission reduction devices in-use vehicles, traffic
management and construction of bypasses.
In order to meet the new emission norms, substantial investments are
required to produce appropriate quality of fuel and vehicles. The Mashelkar
Committee Report has estimated that the investment required for upgrading
refineries to produce Bharat Stage II automobile fuels (petrol and diesel) is
estimated to be around Rs. 170 billion.
An additional amount of around Rs. 180 billion would be required to
produce Euro-III equivalent petrol and diesel. Also, the test facilities
currently available in the country are inadequate to meet the new
regulations.

According to SIAM estimates, the cost of setting up additional facilities to

test vehicles as per the new regulations would be around Rs. 10.4 billion
(excluding the cost of setting up inspection and certification centers). Hence,
the Mashelkar Committee Report has recommended that preferential
treatment be given to the oil and automobile industry in matters relating to:

• Customs duty on imported capital goods, equipment and machinery needed

for the upgradation of technology/facilities.
• Excise duty on indigenously manufactured capital goods, equipment and
machinery needed for up gradation.
• 100% depreciation on plant and machinery set up for up gradation.

33
• Soft loans for technology modernization/upgradation projects.
• Adequate incentives, such as tariff differentials and other measures to
enable the domestic industry to compete with imports; and
• Financial incentives to the manufacturers and users of electric vehicles in
order to make these vehicles competitive.

Safety norms
GoI has notified the requirement for use of safety belts in all cars. In
addition, new noise control norms for passenger cars were notified by GoI
and became effective from January 1, 2003. GoI has also indicated that in
then future additional safety norms will be made applicable to passenger cars
to align them with international standards.

Sector Outlook
Between fiscal 2002 and fiscal 2007, the entire Indian passenger car market
is expected to grow by approximately 9.5%, largely as a result of increasing
demand for segment B cars.

Segment A
This is the entry-level and the most price sensitive segment. Maruti is the
sole manufacturer in this segment since fiscal2000. Between fiscal 2002 and
fiscal 2007, this segment is expected to post a CAGR of 2.7%.

Segment B
This segment is expected to grow to 57.6% of the Indian passenger car
market by fiscal 2007 at a CAGR of about12.3%. Due to the present low per
capita income in India, the price and cost of ownership of cars are significant
factors that affect demand for cars in this segment.

Segment C, D, and E
There are 11 manufacturers with approximately 20 models in these
segments. These segments typically have low sales volumes; therefore, high
growth rates of 11%, 19% and 35%, respectively, are expected between
fiscal 2002 and fiscal 2007.
New model launches, growth in per capita income levels, high aspirations
and status associated with larger cars, are the key factors affecting demand
for cars in these segments.

The Pre-Owned Car Market

34
The size of the pre-owned car market in India has been estimated to be more
then the size of the new car market. The A and B segments account for
between 70 and 80% of the total sales volumes in the pre-owned passenger
car market in India. The proportion of pre-owned cars from segment B is
increasing and is expected to form the largest portion of the preowned
passenger car market. Mid-size and large cars are less popular in the pre-
owned passenger car market primarily due to faster depreciation in value,
lower fuel economy and higher maintenance costs.

The key factors affecting demand for pre-owned passenger car market in
India are as follows:

• The entry of organized participants into the pre-owned passenger car

market resulting in

(1) A more transparent process in valuation and assessment of quality,

35
(2) A more convenient means of selling or exchanging pre-owned cars and

(3) The availability of adequate warranties.

(4) The introduction of a large number of models in the new car market and
a reduction in the holding period resulting in wider availability of recently
introduced models in the pre-owned passenger car market.

(5) An increase in per capita income levels in urban and rural areas and
wider availability of consumer finance for the purchase of pre-owned cars.

Future Scope:

(1). The new car plant and diesel engine plant will be functional by end-
2006. By 2008-09, Maruti will launch a compact car exclusively for export
aiming to sell one million units by 2010. Maruti will launch 5 new models,
face lift existing models and launch new variants in the market.

(2). A section of the media has reported that Maruti Suzuki is ready with a
small car with a 660 cc engine, positioned below the Maruti 800 and priced
at Rs 1.5 lakh.
The company, through this press release, is denying the report. As
announced earlier, the company has no plans to launch a car like the one
mentioned in the report. The Project "Under A" mentioned in the report
refers perhaps to the "A Under", the earlier code name for the A-Star model.
The total investment in the new car plant was Rs 15.24 billion ($384
million). The capacity of the plant will initially be 100,000 cars per annum,
with a potential to scale it up to 250,000 units

(3). The new model will be launched by end-2008," he said. "To begin with,
we have plans to export 100,000 units of the new model annually to Europe
and the rest of the world
Leading carmaker, Maruti Suzuki India reported a marginal growth of
2.20% in vehicles sales to 61,247 units in June 2008 over the same period in
the previous year. These include 4,836 vehicles for the export markets. The
company had sold a total of 59,917 Units.

36
(4). At present, car penetration in India is about 7 cars per 1000 people,
which is even less than some of our neighboring countries. There is also a
large population of two wheeler owners, who would naturally upgrade to an
entry-level car. Therefore there is large latent demand for passenger cars
waiting to be tapped. The compact cars will continue to dominate the
passenger car industry in India.

(5). The highway and road construction projects, such as the Golden
Quadrilateral Project, a highway connecting the four metropolitan areas of
Kolkata, New Delhi, Mumbai and Chennai. Availability of better road
infrastructure will also affect demand for cars.

(6). Passenger car sales account for over 77% of total passenger vehicle
market and UV’s account for the balance.

In fact, UV’s have a higher share than what they did in the earlier years. It is
still lower compared to some of the developed countries. In USA for
instance, UV’s account for 50% of the total Passenger vehicles market and
in
Indonesia they account for 80% of the market. Hence in the future there will
be more and more demand for UV’s hence an opportunity for MUL.

(7). The enabling factors for Indian passenger car industry are all in place
namely, robust economic growth, favorable regulatory framework,
availability of affordable finance and improvements in road infrastructure.
However, there are some uncertainties like the growing higher oil prices,
which could impact the auto industry.
Hence the Indian auto market is at an interesting juncture where both
challenges and opportunities are immense.

PHASE III

MUL’s Vision

37
The Leader in the Indian Automobile Industry, Creating Customer Delight
and Shareholder's Wealth; A pride of India.

MUL’s Core values

• Customer Obsession

• Fast, Flexible and First Mover

• Innovation and Creativity

• Networking and Partnership

• Openness and Learning

MUL’s Principal Objectives

As the leading player in the small car segment of the Indian market, they
have the following principal objectives:

• To expand the size of the Indian market for small cars by strengthening and
expanding the dealer network and making automobile financing available at
competitive rates.

• To strengthen their leadership position in the small car segment of the

Indian market; and

• To continue to benchmark them selves against improving global

manufacturing, marketing and other practices and standards, strive to
increase customer satisfaction through quality products and new initiatives,
and promote the financial strength of their sale network.

MUL’s Competitive Strengths

Largest Distribution and Service Network in India:

38
  400 showrooms covering 229 cities
 150 rural format sales outlets in 143 cities
 620 dealer service stations &1900 Maruti Authorized Service
Stations
 Over 1190 cities covered by Service Network
 Widest product range in India
 Majority of new showrooms & workshops coming from
existing dealers
 Present in Gasoline, Diesel and LPG
 6 models launched in last 30 months

Productivity and Cost efficiency

(1) In Manufacturing Operations

39
 110
100 100 100 100 100

82
Indexed to FY'02

48

21

Plant Manpower Hrs/Veh Inhouse Warranty Inhouse Rejection Direct Pass

2001-02 2006-07

(2) In Materials Engineering

90.8% in FY’01 75.7% in FY’07

• Expertise in small car technology. As a subsidiary of Suzuki, they

have access to globally respected technology in the small car segment. They
have the advantage of Suzuki’s expertise in all aspects of small car
technology and design, with respect to their products, manufacturing
processes and business practices, the development of their supply chain and
the training of personnel.

• Extensive product portfolio. Their diverse product range includes

cars in segments A, B and C, and utility vehicles.. They are the major
manufacturer of cars in segment A (priced below Rs.300, 000). The Maruti
800 has been the largest selling car in India for several years, and still
continues to have the very high sales volumes. They also manufacturer three
distinct models, the Zen, the Alto and the WagonR, in segment B (priced

40
between Rs. 300,000 and Rs.500, 000). Their dominance in segment A and
extensive products range in segment B enables them to offer the customer a
wider choice in the small car segment than any of their competitors. In
addition, the absence of any major manufacturers in segment A
Their dealer’s greater flexibility in promoting models in segment B.

• Quality products. In November 2001, MUL was one of the first

automobile manufacturers in the world to receive the ISO 9001:2000
certification. They benchmark their products against international quality
standards. They export heir products to approximately 70 countries, which
are manufactured using the same assembly line as that for the domestic
market.

• Extensive sales and service network MUL has the largest network
of dealers and service centers amongst car manufacturers in India In addition
to the distribution of cars, their dealership network is a critical resource in
their efforts to provide customers with a “one-stop shop” for automobiles
and automobile related products and services such as automobile finance,
automobile insurance, Maruticertified pre-owned cars available for purchase,
and leasing and fleet management, in order to promote customer loyalty.

• Brand strength: MUL is present in the Indian market for almost 24

years and have built the brand on the basis of the values of trust and
reliability in 2000, 2001 and 2002, J.D.Power Asia Pacific, Inc.
19 ranked MUL the No. 1 in the India Customer Satisfaction Index, which
assesses customer satisfaction with product quality and dealer service. NFO
Automotive’s 2002 Total Customer Satisfaction Survey ranked Maruti
products as No. 1 in the “Economy”, “Premium Compact” and “Entry
Midsize” segments respectively, for 2002.

• Integrated manufacturing facility. Their manufacturing facility

consists of fully integrated plants with flexible assembly lines located at
Gurgaon. The facilities have advanced engineering capability and each plant
is upgraded on an ongoing basis to improve productivity and quality. They
are one of the most efficient among the vehicle manufacturing facilities of
Suzuki’s subsidiaries outside Japan in terms of productivity measured as the
ratio of number of vehicles produced to number of employees.

• Strong vendor base and higher rates of localization: In order to

41
improve quality and generate economies of scale, MUL has reduced the
number of vendors of components in India from 370 as of March 31, 2000 to
about 100 as in 2005. As of the same date, they had strategic equity interests
through joint venture agreements in their vendors, who together supply a
substantial portion of the purchases of\ components. A number of their
vendors are their dedicated suppliers in that they account for a majority of
their turnover. Vendors located within a radius of 100 kilometers from the
facilities supply the majority of the components. The production systems of
their vendors are generally aligned to their needs for a reliable and timely
supply of components that meet the required quality standards. This has
enabledMUL to increase the proportion of locally sourced, lower cost
components in their models, a concept refer to as localization.

• Skilled labour and experienced management. The labour force at

MUL has become increasingly productive in terms of vehicles produced per
employee and receives training on an ongoing basis, including training by
Suzuki. Due to their presence in the Indian passenger car market for a
significantly longer period they have been able to build a highly experienced
management team that is familiar with conditions in the Indian passenger car
market.

MUL’S basic Strengths

42
(Pre -owned cars initiative – over 240 outlets in 150 cities;)

(Maruti playing the role of an aggregator)

(Maruti-SBI alliance – Strategy to expand the market)

(Hassle Free Insurance- Penetration over 85%)

43
 (Extended warranty- Penetration of ~50%)

(Maruti Driving School – Already 18500 drivers trained)

(Auto Card - Loyalty card to over tap 5 million customers)

MUL’s Business Strategy

44
MUL intend to continue to focus on the small car segment, while offering
products in most segments of the Indian passenger car market. The business
strategies of MUL are:

Maintain and enhance the product range. MUL utilize Suzuki’s

expertise in small car technology to produce new variants of the existing
models and to upgrade the existing one with contemporary technology and
features.
They intend to increase the number of variants of existing models in the A
and B segments

Increase reach and penetration. MUL has one of the extensive sales
and service network in terms of geographical spread, and penetration, in
terms of sales volumes across India. They continuously assist their dealers in
enhancing their performance and profitability by suggesting improvements,
such as increasing the number of sales executives employed at dealerships.
Currently, wide network of Mass’s primarily provides after sales service.
They can even use the Mass’s that are located in some of the more remote
areas of India as sales outlets to increase the reach and penetration in those
areas.

Increase availability of automobile finance. MUL being the market

leader should seek opportunities to expand the size of the Indian passenger
car market, especially in the small car segment. They have made available,
through the dealers, finance products of eight select finance companies
under the brand “Maruti Finance”. This increases the availability and
transparency of the financing transactions, which can contribute greatly to
the customer satisfaction and confidence. Their agreement with the State
Bank of India, or SBI, to provide the finance to their customers has enabled
it to leverage the strength of the extensive network of SBI, more than 9,000
branches across India. This all will enable it to promote the demand of its
offering among SBI’s vast customer base and expand the size of the
passenger car market in India.

Secure repeat purchases by offering a “360 degree customer

experience”. MUL is extensible trying to provide Customers with a “one-
stop shop” for automobiles and automobile-related products and services.

45
They are trying to make available to the customers a wide range of Maruti-
branded services at different stages of ownership. This helps them to secure
repeat purchases by the existing customers and increase the revenue. The
following products and services offered by MUL:

- Automobile insurance;
- Automobile finance;
- Maruti-certified pre-owned cars available for purchase;
- Leasing and fleet management;
- Accessories; and
- Extended warranties

Continuous benchmarking of manufacturing capabilities: MUL

continuously benchmark, with that of
Suzuki’s premier one, its facility to improve its operating efficiencies. As
part of Suzuki’s plans to make Maruti its research and development center
for cars in Asia (outside Japan), it is expected that MUL will ultimately be
having the capability to have full model change capability.

Continue to reduce costs to offer more competitive products.

Cost competitiveness has been, and continues to be, central to MUL’s
strategy, as the leading manufacturer in the small car segment, to expand the
size of the market by offering competitively priced, high quality products.
The components of this strategy are:

Higher levels of localization

MUL has increased the level of localization over time by working closely
with the vendors in India to upgrade their capabilities, which has enabled
them to reduce costs and has increased the flexibility in pricing. A look at
the new models tells that MUL, with any new model, tries to have a
minimum of 75% localization level and then tries to increase the same to at
least 90%.

Vendor participation in cost reduction

In some of the major vendors MUL has implemented the “Maruti Production
System” which focuses on the eliminating the wasteful activities in their
manufacturing processes such as improving their productivity, reducing the

46
number of their components that are rejected, reducing materials handling,
improving their yield from materials, and reducing their inventories. This
helps in reducing the costs of production, which also reduces then costs of
the components being required by MUL.

Cost reduction on warranties

The warranty costs of the vendors are the cost of components incurred by
them to service warranty claims arising from defects in components supplied
by them. MUL works in association with the vendors to reduce their
warranty cost.

Reduction in initial investment cost

Through in-house development and localized sourcing of dies, welding jigs
and other equipment, introduction of flexible welding lines that can be used
for multiple models, and in-house development of machine shop
equipment ,MUL tries to reduce the initial cost associated with the initial
investment.

Reduction in number of vehicle platforms

MUL currently uses six basic vehicle platforms for production. They even
intend to reduce the number of basic vehicle platforms and increasingly
share basic vehicle platforms among multiple models in order to spread
development costs and achieve economies of scale.

Lowering the cost of ownership: MUL seeks to reduce the

Consumer’s cost of ownership of their cars, which comprises the cost of
purchase, fuel consumption, maintenance, including spare parts and repairs,
insurance, and resale value. MUL is trying to achieve this by:

• manufacture high quality, fuel-efficient, cars;

• Price cars, spare parts and accessories, and extended warranties,
competitively;
• make automobile finance more easily available to the consumer on
competitive terms;
• make maintenance services, including spare parts, accessories and repairs,
widely available through the extensive sales and service network;
• offer automobile insurance and other automobile-related services through
the sales and service network; and
• Create a market for Maruti-certified pre-owned cars through “Maruti True
Value” business.

47
New Business Initiatives
As the largest manufacturer and leader in the small car segment, Maruti had
continually seek new ways to utilize vast car parc, range of products and
extensive sales and service network to expand the size of the passenger car
market in India. Maruti recently launched new initiatives to develop the
market for automobile insurance, automobile finance, leasing and fleet
management, and pre-owned cars. They are aiming to provide customers
with a “one-stop shop” for automobiles and automobile-related products and
services, and build on wide customer base and extensive sales and service
network to make available to their customers a wide range of Marutibranded
services at different stages of ownership, which they refer as the “360 degree
customer experience”. In the nine months ended December 31, 2002, their
new business initiatives generated net revenue of Rs. 44 million.

Mul’s Supply Chain

MUL’s inputs primarily comprise raw materials and purchased components.

Only a small amount of raw material and components consumed are
imported and a much larger portion is purchased from the sources within
India.

Raw Material Suppliers

The raw materials used in the manufacturing process primarily comprise
steel coils and paints. In recent years,
MUL is increasingly trying to localize the purchases of steel coils with a
view to reduce cost. Earlier MUL used to follow the tender system for the
purchase of steel. Under this system, specifications were advertised and
accept the lowest price offered by a supplier who could meet the
specifications. In 2001 MUL moved to the quotation system which gives
them the flexibility to renegotiate the prices once an offer is submitted.
Standard purchase orders are issued covering a period of six months for
purchase of steel from foreign suppliers for Indian supplier the period

48
extends up to one year. .
At MUL the role of the vendors has gradually evolved from tactical to
strategically where the vendors work in close coordination with MUL to
meet our long-term goals in terms of:

• Component development;

• Quality;

• Delivery; and

• Cost control.

In order to improve quality and generate economies of scale, MUL has

reduced the number of vendors of components in India from 370 as of
March 31, 2000 to about 100 as in 2005.

In case of repair and replacements, costs of defective components supplied

are borne by the vendor.

Delivery by Vendors
MUL has a delivery instruction system that provides details of the
component requirements for every 15 days, across the different variants of
the various models, to the vendors. Vendors are linked to the MUL through
the Internet-based information network, which maintains online information
regarding order status and delivery instructions. These has helped in
reducing both inventory levels and lead times required for the supply of
various components and sub-assemblies, and enable the vendors to more
efficiently plan and dispatch their products.

Vendors located within a radius of 100 kilometers from the manufacturing

facility supply the majority of the components. This has enabled the vendors
to eliminate packaging and supply components directly to the assembly line.
Vendor Quality Control
Quality management system such as ISO 9000/ QS 9000 forms the basis for
producing a quality product. To assist small and medium vendors in
achieving ISO 9000 certification, in 1995 MUL adopted a cluster approach
wherein vendors are grouped together, are trained in quality management

49
and are assisted in obtaining ISO 9000 certification. This cluster approach
was extended to helping vendors attain QS 9000 certification. Periodic
vendor quality system audits are conduct in order to ensure that quality
standards are sustained.

Imported components

Imported components are mainly purchase from Suzuki.

Sales network

Dealers: MUL has the largest network of dealers amongst car

manufacturers in India. As of March 31, 2003, dealers had employed more
than 3,500 sales executives. Sales network is linked with the MUL through
the secure extranet-based information network. The sales of spares,
accessories and Automobile-related services such as insurance and finance
serve as additional sources of revenue for the dealers. The availability of
these related products and services at sales outlets also helps to attract
customers to the outlets and promotes sales of the cars.

Agreements with our dealers MUL dealers provide services to

customers such as pre-delivery inspection of vehicles, sales of cars, after
sales service, supply of spare parts and other services that promote sales of
cars within the territory for which they are appointed. Dealers are required to
maintain their outlets in accordance with the specifications and employ well-
trained sales staff. Agreements with the dealers are usually of five years.
These agreements are generally renewable for successive terms of three
years, by mutual agreement.

Enhancing dealer performance: The performance of the dealers is

followed and improvements are suggested frequently. In order to assist the
dealers in enhancing their performance and capabilities, MUL has
introduced a concept of “Balanced Scorecard”. Using this tool, the
performance of a dealership in several areas of operations, including sales,
service, spares and accessories, financial management and management
systems is measured.

50
Dealers who perform well on the “Balanced Scorecard” are reward with a
cash payment at the end of the fiscal year. The “Balanced Scorecard” serves
as an effective incentive for dealers to enhance their performance.

After-sales Service Network

There are more than 400 Maruti dealer workshops and more than 1,500
Maruti Authorized Service Stations, or MASSs, covering more than 900
cities in India. In addition, 24-hour mobile service is also offered under the
brand “Maruti On-road Service”. As a benchmark for dealers with respect to
service quality and infrastructure facilities, MUL has launched service
stations under the brand “Maruti Service Masters, or MSMs. MUL also has
service stations on highways in India under the brand “Express Service
Stations”. To promote sales of spare parts and the availability of high
quality, reliable spare parts for its products, spares are sold under the brand
name “Maruti Genuine Parts” or MGP. These are distributed through the
dealer network and through the authorized sellers of the spare parts. Many of
the MASSs are at remote locations where MUL do not have dealers. In order
to increase the penetration, in terms of sales volumes, of its products in these
remote areas, some of the MASSs are integrate into the sales process in
order to increase sales of the cars and related products and services such as
spares and accessories, insurance and financing the company decided to
move to an open environment. It drew up a plan that detailed the new
infrastructure and the applications to be run on the network. At the very
outset, it decided to go for fiber optic cabling, even though fiber was just
introduced in India at that time. This gives them the fiber's reliability and
scalability. They now have an infrastructure that can scale to support
applications which can be added in future.
Before a car is produced, the systems at the shop floor connect to a central
database and query it about the car model that needs to be manufactured.
The response from the database takes less than a few seconds, so that the\
assembly line can start running. For this, two critical issues taken care of
are : Reliability and throughput.
To ensure reliability, MUL chose a meshed network, so that if one link goes
down, the shop floor and the data center can still communicate through an
alternative route. The entire infrastructure is geared towards ensuring that\
the shop floor can run in real time.
MUL has also implemented an enterprise management system, called
Unicenter TNG." The software monitors all links. If something goes down,
an automatic complaint is logged into MUL's internal call center.
The IT applications MUL runs are mostly enterprise wide. Some of the

51
critical or major applications include materials for making and dispatching
cars and spares to distributors. MUL distributors, who interact with the
company daily, also use a Web-based application to log in their
requirements for new cars, spares and accessories.

They can also track the status of their order. In fact, the system is being
expanded to offer finance, insurance and other intangibles to customers. All
these applications run on the Internet and connect to the databases in
Gurgaon.

Research and Development

R&D activities of Maruti have the twin objectives of reducing product costs
by developing capabilities of local vendors and becoming a regional R&D
hub for all Suzuki operations.
The company has adopted a ‘focused model cost reduction’ technique.
Maruti has been continuously engaging in Value Analysis/Value
Engineering (VA/VE) activities across its operations. Some areas in which
MUL carry out research and development are localization and development
of components, cost reduction measures such as
VA/VE, development of alternate fuel (CNG and LPG) vehicles,
performance-benchmarking to certain parameters such as noise, ride
handling and braking and development of power-steering for certain models.
MUL regularly upgrade its models and also launch variants by adding
features developed through research and development.
All this has resulted in significant reduction in the investment required for
the modifications.
As part of Suzuki’s plans to make Maruti its research and development
center for cars in Asia (outside Japan), it is expected to have full model
change capability by fiscal 2007.

Manufacturing
The core focus areas of Maruti’s manufacturing division are:

• Benchmarking against global standards so as to efficiently manufacture

quality products.

52
• Building a strong and motivated work force by emphasizing safety,
education and continuous improvement of the manufacturing capabilities
and those of the vendors.

Our Manufacturing Facility and Process

Facility

Maruti’s manufacturing facility comprises three integrated plants with

flexible assembly lines located at Gurgaon in the northern state of Haryana.
The first plant was set up in fiscal 1984 with an initial installed capacity to
produce 20,000 vehicles per annum, which was augmented to 130,000 by
fiscal 1991talled capacity was further increased with the second plant
becoming operational in fiscal ((((29)) 1995 to 200,000 vehicles per year. In
fiscal 1996, with capacity increases in each plant, installed capacity
increased to 250,000. With the third plant becoming operational in March
1999, installed capacity increased to 350,000 vehicles per year, which is the
highest among passenger car manufacturers in India and among the
passenger car manufacturing facilities of Suzuki’s subsidiaries outside
Japan. 24 September 2004, Suzuki Motors and Maruti decided to invest 32.7
billion rupees over the next five years to set up a new car assembly unit, a
diesel engine manufacturing unit and for increasing automation and
efficiencies in Maruti's current facilities. Maruti Udyog would hold a 70 per
cent stake in the new joint venture, under which a car assembly unit is being
set up; Suzuki would hold the balance. The new unit, which would make
high-end cars, is being set up in Manesar, Gurgaon, and would have a
capacity to produce 250,000 units a year. This plant will receive an
investment of 15.2 billion rupees, which is expected to begin its production
by the end of 2006. The proposed diesel engine unit would be set up under
Suzuki Metals India, an existing 49:51 joint venture between Maruti and
Suzuki, respectively. The engine plant will have a capacity of 300,000 diesel
engines and 20,000 petrol engines. It will also make up to 140,000
transmission assemblies. The plant will supply diesel engines to Maruti as
well as export engines to Suzuki subsidiaries in Europe and Asia. This plant,
which will be set up at a cost of 17.5 billion rupees, will begin production by
the end of 2006. Suzuki would undertake a feasibility study to set up a
gearbox production unit in India. This unit would be set up under Suzuki
Metals India, which is would be renamed as Suzuki Engineering India.
Maruti’s facility has advanced engineering capability and is upgraded on an
ongoing basis to improve productivity and quality. Maruti have 17

53
manufacturing shops and are capable of producing more than 50 variants of
the nine basic models manufactured, with different specifications, within the
same day. This is possible due to our information technology-enabled
vehicle build sequence system and vehicle tracking system.
Under the vehicle build sequence system, at the production planning stage,
requirements are communicated via our intranet (internally) and our extranet
(to vendors) in advance as to the time and place for delivery of components
and other production inputs in order to fulfill production targets. Our vehicle
tracking system monitors and records the implementation of the planning
during production.

Utilities
Maruti do not have to rely on outside sources of power as they have a 60-
megawatt gas turbine captive power plant, which has multi-fuel capability.
They also have our own reverse osmosis water treatment plant and effluent
and sewage treatment plant.

Productivity

Improving productivity is an ongoing effort at Maruti, through the Maruti

production system, or MPS, which is derived from the Suzuki production
system, and focuses on elimination of wasteful activities taking place during
manufacturing processes. In addition to MPS activities, in-house
automation, increasing utilization of production lines, outsourcing of low
value-addition jobs and reduction in materials handling have contributed to
improvements in the productivity of there employees and the efficiency of
there operations.
As shown in the table below, Maruti’s employee productivity, measured as

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the ratio of production volume in a fiscal year to the number of its
permanent employees at the end of the fiscal year, increased by
approximately 79% from fiscal 1995 to fiscal 2002.

Manufacturing Process
The manufacturing process at Maruti facility is depicted below:
The production of a car at Maruti facility occurs in the following stages:

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Press Shop: Press shop has five transfer presses and two blanking lines. In
the press shop, steel coils are cut to the required size and panels are prepared
by pressing them between various die sets such as doors, roofs and bonnet.
An anti-rust coat is applied at this stage.

Weld Shop: There are three welding shops with 122 six-axis robots and 25
in-house manufactured two-to-four axis robots. In this shop, various press
metal components manufactured in the previous stage are spot-welded
together to form the body shell. Various parts such as the floor panel, side panel,
doors and bonnet are sub assembled in this shop. Subsequently, the assembled
parts undergo final welding. The welded body is sent to the paint shop
through a conveyor.

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Paint Shop: There are three paint shops, within one of which the final outer
body is fully painted by robots. In the paint shop, the body undergoes
various pre-treatment and electro deposition painting processes to provide a
high corrosion resistance to the body. The car body is given an intermediate
or primer coat before applying the storing 32n topcoat paint. The
intermediate and the final coat are applied by using automatic electrostatic
spray-painting machines (micro bells) and robots, followed by a baking
process.

Assembly Shop: Maruti has highly flexible assembly lines, which can
simultaneously handle a large number of variants as well as adapt to
sequence changes. The painted bodies proceed for final assembly in three
stages. The first stage is the trim line wherein various components such as
roof head lining, windshield glass and interior trim components are fitted.
Thereafter, the car is transferred to an overhead conveyor, the chassis line,
wherein components such as the engine, gearbox and front and rear axles are
assembled on the underbody. The vehicle is then lowered to the final line on
its own wheels and here components and parts such as seats, the steering
wheel and the battery are fitted. The completely assembled vehicle finally
rolls out of the assembly lines to the final inspection stages.

Machine and engine shops: Assembling and testing of engines takes

place at engine shops and carry out precision machining of engine
components in our machine shops.

License agreements with Suzuki

Suzuki has several license agreements with Maruti under which it has, since
Maruti’s inception:

• Provides with technical know-how, assistance and information for the

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manufacture, sale and after-sales service of various products and parts.

• Supplied components to Maruti’s passenger cars.

• Deputed technical personnel to their facility;

• Help them to develop manufacturing processes and integrate certain

Japanese management practices such as kaizen, which is Japanese for
continuous improvement, in various plants.

• Training of personnel.

• Help them to develop and manage the supply chain for their products.
Maruti in return had agreed with Suzuki that amongst other things:

• Maruti will not manufacture in, or export products covered by agreements

with Suzuki to, any territory except those permitted by Suzuki.

• Maruti will not enter into agreements with any other manufacturer to sell
any product or part that competes with any product or part covered by the
license agreements with Suzuki.

• Maruti will not otherwise sell, distribute or promote the sale of any product
that competes with products covered by the license agreements with Suzuki.
Suzuki will not be liable to Maruti for damages arising from the use of the
licensed information and disclaims responsibility for all representations and
warranties made by them with respect to the licensed products…

CONCLUSION

Where does Maruti stand on a SWOT (strengths, weaknesses,

opportunities and threats) analysis?

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On the positive side, with Suzuki holding a 54 per cent controlling
stake in MUL, one can expect a substantial reduction in costs with
royalties and transfer prices being melted down. The growing risk of
non-acceptance of new launches in the marketplace further
accentuates this risk which could manifest in yet another financial
year, when the company's bottomline slipped into the red.

REFRENCES

1. www.indiainfoline.com
2. www.indiamart.com
3. www.google.com

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4. www.marutisuzuki.com
5. www.p4magzine.com
6. www.wikipedia.com
7. www.business.rediffmail.com
8. www.team-bhp.com
9. www.mouthshut.com
10. www.knowindia.com

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