Automobile Four Wheeler Industry

AUTOMOBILE FOUR
WHEELER INDUSTRY

MARUTI UDYOG LTD.

MARKET APPLICATIONS &

PRACTICES

Market Applications & Practices – Prof Varahan 1

 Automobile Four Wheeler Industry

GROUP MEMBERS

 ASHISH BHAT (462)

 RAHUL DABHADE (468)

 RACHIT J. GANATRA (475)

 HEMANT MISHRA (489)

 VINAY SAHASRABUDDHE (504)

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SUBJECT INDEX

Sr. PARTIULARS PAGE

No. NO.

1 INDIAN FOUR WHEELER INDUSTRY 04

.
2 VISION 20:20:1 09
.
3 MARUTI UDYOG LTD. 12
.
4 ROAD SAFETY 13
.
5 MARUTI SUZUKI’s EXPORTS 15
.
6 CORPORATE SOCIAL RESPONSIBILITY 16
.
7 REACHING OUT TO CUSTOMERS 19
.
8 TARGET COST APPROACH 20
.
9 WORKING WITH SUPPLIERS 22
.

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1 MARUTI’S CURRENT SCENARIO 23

0
.
1 CAR PRICES REVISED 25
1
.
1 MARUTI’S NANO 26
2
.
1 SWOT ANALYSIS 27
3
.

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INDIAN FOUR WHEELER INDUSTRY

The 4W industry in India has not quite matched up to the performance of its counterparts
in other parts of the world. The primary reason for this has been the all-pervasive
regulatory atmosphere prevailing till the opening up of the industry in the mid-1990s. The
various layers of legislative Acts sheltered the industry from external competition for a
long time. Moreover, the industry was considered low-priority as cars were thought of as
"unaffordable luxury".

Initially in the post-liberalisation period, the automotive sector, especially the passenger
car segment, saw a boom. The buoyancy in the sector was derived primarily from
economic vibrancy, changes in Government policies, increase in purchasing power
(especially of the upper middle class), improvement in life styles, and availability of car
finance. The passenger car industry was finally deregulated in 1993, and many
companies, both Indian and foreign (like Daewoo, Ford, General Motors, and
DaimlerChrysler), entered the market. However, the smooth sailing was suddenly
disrupted in the last quarter of FY1996. The automobile industry, which contributed
substantially to industrial growth in FY1996, failed to maintain the same momentum
between FY1997 and FY1999. The overall slowdown in the economy and the resultant
slowdown in industrial production, political uncertainty and inadequate infrastructure
development were some of the factors responsible for the slowdown experienced by the
automobile industry. In FY2000, the sector experienced a turnaround, posted positive
growth rates and witnessed the launch of many new models. But the spectacular growth
in FY2000 was followed by a decline in FY2001 and only a marginal growth of 0.5% in
FY2002.

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PASSENGER VEHICLE PRODUCTION GRAPH

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MUVs
The MUV segment consists of vehicles that are suited to both rural and urban areas. In
rural areas where the roads are usually bad, these vehicles are used as goods carriers and
also for public transportation. Northern and Western India account for nearly two-thirds
of the demand for MUV. Specifically, in States like Rajasthan, Madhya Pradesh, Uttar
Pradesh and Maharashtra, the demand for MUVs is the largest. There are three segments
of buyers for MUVs: the private market, Government, and the Defence. Until the 1990s,
the Government and Defence segments accounted for the largest share of the market. The
reduction in Government and defence spending since the 1990s has substantially reduced
sales to these two segments. This has pushed private sector purchases into greater
prominence.

There are three sub-segments of the UV / MUV segment: the hard-top, soft-top and pick-
up. The hard-top version consists of the higher-end Sports Utility Vehicles (SUVs) that
have been present in the Indian markets since FY1999. Following the success of the
higher-end SUVs, the share of the hard top segment in total MUV sales has registered an
increase. Soft-top MUVs, which are largely dependent on sales in the rural and semi-
urban markets where the vehicles serve as modes of mass transportation (maxi taxi), have
witnessed a contraction in volumes in recent years. The declining share of the soft-top
sub-segment is attributable largely to the increasing acceptance of SUVs as an alternative
to soft-tops (and even higher end-cars). Those apart, soft-top sales have also been affected
by a decline in rural income, increase in sales tax in some states, increase in diesel prices,
enforcement of strict emission control norms, and restraints on the issue of licenses to use
soft-top vehicles as rural taxis.

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Demand Characteristics

Passenger Cars

In developed markets, engine capacity and wheel-base are the bases of segmentation of
passenger cars: price does playa role but only up to a point. Since affordability is the most
important demand driver in India, the domestic car market has until now been segmented
on the basis of vehicle price. Price-based competition takes place in a continuum rather
than in segments since nearly all the models are launched in multiple versions at different
price points. As a result, a higher-end variant may compete with a lower-end variant of a
car in a segment above it.

MUVs

the MUV segment consists of vehicles that are suited to both rural and urban areas. In
rural areas where the roads are usually bad, these vehicles are used as goods carriers and
also for public transportation. Northern and Western India account for nearly two-thirds
of the demand for MUV. Specifically, in States like Rajasthan, Madhya Pradesh, Uttar
Pradesh and Maharashtra, the demand for MUVs is the largest. There are three segments
of buyers for MUVs: the private market, Government, and the Defence. Until the 1990s,
the Government and Defence segments accounted for the largest share of the market. The
reduction in Government and defence spending since the 1990s has substantially reduced
sales to these two segments. This has pushed private sector purchases into greater
prominence.

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Vision for the Future: The opportunity landscape for the Indian auto industry
would encompass manufacture of vehicles and components for domestic sales,
manufacture for exports (both vehicles and components), and export of services in
areas such as design, engineering, and back office operations. It is estimated that the
total turnover of the automotive industry in India would be in the order of USD 122-159
billion in 2016 (a substantial increase from the size of USD 34 billion in 2006).

Implementing AMP 2006-2016 would need an incremental investment in the

order of USD 35-40 billion to come into Indian auto industry over the next ten years
(2006-2016). It is anticipated that the bulk of this investment will come from expansion
of capacities by existing manufacturers operating in India and remaining from global
multinational corporations (MNCs) seeking to make India their manufacturing base.
Competition for attracting investments in India would come from countries such as
China and Thailand.

Vision Statement: Based on the above scenario, the Vision Statement for
India’s automotive sector will be as follows:
“To emerge as the destination of choice in Asia for the design and manufacture
of automobiles and automotive components. The output of India’s automotive
sector will be USD 145 billion, contributing to more than 10% of India’s Gross
Domestic Product and providing employment to 25 million persons additionally
by 2016”.

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MARUTI UDYOG LTD

Company Snapshot:

Incorporated February 1981

Joint Venture October 1982

Agreement
54.2% Suzuki, Japan, balance with Other Financial Institution and
Equity Public
Structure 4993 of Financial year 2006-07
Employee
Strength Gurgaon: 3 vehicle assembly plants
Manesar: 1 vehicle assembly plant
Facilities Head Office in New Delhi, India
Regional offices: 16
Diesel
Powertrain Suzuki Powertrain India Limited (SPIL), Joint Venture between Suzuki
Plant Motor Corporation 70% Equity the rest is with Maruti Suzuki India
Limited.
Joint Venture Global hub for Diesel engines and transmissions for Suzuki worldwide.

Subsidiary 15 Joint Venture companies, including Suzuki Powertrain India Limited

Companies for component supply.

Proposed True Value: for sale and purchase of pre owned cars
Investments Maruti Insurance: for insurance of Maruti vehicles (Maruti’s
till 2010 companies)
Maruti Finance: for financing Maruti vehicles
Network
Reach INR 9000 Crores i.e. INR 90 Billion, Yen 257 Billion ( 1Yen = 0.35 Rs),
Financial $ 2.25 Billion (1 $ = Rs 40) *
year
2006-07 Sales 398 Outlets covering 228 cities
Service 2421 workshops covering 1193 cities
Pre-owned Car Sales 242 dealers covering 148 cities

MARUTI SUZUKI TODAY

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More than half the number of cars sold in India were a Maruti Suzuki badge. It is a
subsidiary of Suzuki Motor Corporation Japan.

As India's largest passenger car company, it accounts for over 50 per cent of the domestic
car market.

It has a sales network of 562 outlets in 372 towns and cities, and provide maintenance
support to customers at 2538 workshops in over 1200 towns and cities (as on December
31,2007).

Since inception, it has produced and sold over 6.75 million vehicles, including almost
500,000 units in Europe and other export markets.

Maruti has been rated first in customer satisfaction for eight years in a row in J D Power's
Surveys, and is India's Most Respected Automobile Company (As per survey conducted
by Business World, a reputed Indian Magazine)

Also, in an independent survey conducted by Forbes.Com where they rated top 200
reputed companies on various parameters such as reputation within the customer and
employee fraternity, They stood 91st. In the automobile section they finished 7th.

THE MARUTI DNA

Maruti was born as a government company, with Suzuki as a minor partner, to make a
people's car for middle class India. Over the years, Maruti’s product range has widened,
ownership has changed hands and the customer has evolved. What remains unchanged,
then and now, is Maruti’s mission to motorise India.

Maruti’s parent company, Suzuki Motor Corporation, has been a global leader in mini and
compact cars for three decades. Suzuki's technical superiority lies in its ability to pack
power and performance into a compact, lightweight engine that is clean and fuel efficient.
The same characteristics make Maruti’s cars extremely relevant to Indian customers and
Indian conditions. Product quality, safety and cost consciousness are embedded into
Maruti’s manufacturing process, which are inherited from Maruti’s parent company.

Right from inception, Maruti brought to India, a very simple yet powerful Japanese
philosophy “smaller, fewer lighter, shorter and neater.”

From the Japanese work culture they imbibed simple practices like an open office, a
common uniform and common canteen for everyone from the Managing Director to the
workman, daily morning exercise, and quality circle teams.
From the Japanese work culture Maruti imbibed simple practices like an open office, a
common uniform and common canteen for everyone from the CEO to the workman, daily
morning exercise, and quality circle teams.

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MARUTI’S ACCOLADES

Maruti’s customers have rated them first in 'Customer Satisfaction Index' among all car
makers in India for eight years in a row, in the annual J D Power Asia Pacific survey on
Customers Satisfaction Index.

Other categories

In SSI (Sales Satisfaction Index) which evaluates customer satisfaction at the point of
purchase- They posted a hat-trick with three consecutive wins in 2004-06.

In APEAL (Automotive Performance Execution Layout Award)- Maruti’s cars Wagon R

and Alto scored the highest, for second Consecutive year, for the year 2006.

In IQS (Initial Quality Study) - Zen (the old model) scored the highest followed by
Wagon R and Alto in their respective categories, for the year 2006

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ROAD SAFETY

More than 100,000 Indians are dying every year in road accidents. More than a million
are injured or maimed. Many years ago, a study found that road accidents cost the
country some Rs 55,000 crore every year.

While the boom in the domestic automobile industry, and the government's focus on
roads and highways are both heartening developments, they will have to move hand in
hand with a cohesive effort to improve road safety.

INTEGRATED ROAD SAFETY

Maruti believes that we can learn from the experience of countries like the US, UK,
Netherlands and Austria, which has demonstrated that it is possible to bring down road
fatalities through the right public policy and its effective enforcement.

By adopting an integrated, collaborative approach to road safety they have managed to

reduce road fatalities. Experts from road construction and design, vehicle manufacturing,
driver training, law enforcement, healthcare have all been brought together by a national
road safety initiative to work out a combined strategy to bring down road accidents.
In India, we have a huge apparatus for road safety: national and state level councils,
driver license authorities, enforcement agencies like the traffic police, university
researchers, voluntary groups, all of whom are engaged in improving road safety. But we
are yet to approach road safety in an integrated manner.

India has its own peculiar traffic conditions, including diversity of vehicles, quality of
roads and below par monitoring and enforcement. A national road safety initiative will
have to design solutions specially tailored for these conditions.

A BEGINNING BY - MARUTI SUZUKI

While the challenge of road safety is gigantic, Maruti Suzuki believes that as a market
leader it should undertake initiatives that could act as catalysts for other organizations.

In line with that, it is managing two IDTRs (Institute of Driving Training and Research)
and another 30 Maruti Driving Schools in collaboration with Maruti’s dealers to inculcate
safe driving habits in people.

Maruti’s first major effort in promoting road safety was in the year 2000 when it offered
to take management control of Delhi Government's Institute of Driving Training and
Research (IDTR).
They introduced training facilities and infrastructure including world-class driving test
tracks, advanced computer simulators and training modules based on the ones followed in
the UK and adapted to Indian conditions.

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The IDTR has trained and evaluated more than 380,000 people, predominantly
commercial drivers. Encouraged by the response, it has set up a second IDTR, this time in
South Delhi, again in collaboration with Delhi Government.

Several other state governments, such as Haryana, Punjab, Bihar, Uttarakhand,

Chattisgarh and West Bengal have also approached Maruti to set up driving training
institutes in their states. The company has already signed an MoU with the Government
of Haryana for setting up two driving training institutes at Rohtak and Bahadurgarh.

Maruti Driving Schools

Recently, Maruti has also signed an MoU with Gujarat Government to set up country's
first Driving and Technical Training Institute for Tribal Youth. They have offered to set
up, manage and run The Gujarat Regional Automobile Training Institute (to be referred as
GUJRATI) at Gajadara village of Waghodia taluka in Vadodara district. This institute will
not only provide driving training to tribal youth, it will also offer automobile technical
training to them.
Maruti has also involved its dealers across country in a big way in promoting road safety
and safe driving. In collaboration with them, the company has set up 30 Maruti Driving
Schools in 27 different locations across the country. These schools are equipped with the
world class, state of the art driving simulators. Over 21,000 people have been trained so
far.
The Curriculum
The driving training modules are as per international standards and include both theory
and practical. Difficult driving situations such as fog, uphill terrain, rain and night driving
is simulated on the simulators to give learners a first hand account of the demanding
weather conditions. They are then taken for actual driving on road.

This rich mix of theory and practical gives learners a critical insight into the required
driving skills. In addition, the learners are also given technical training like changing flat
tyre and handling minor snags and repairs in the vehicle. Special sessions are organized
for learners on traffic rules, regulations and signage's.

Most importantly, the training lays great emphasis on developing right attitude for safe
driving and road safety among learners.

For the convenience of women learners, there are lady instructors at MDS.
The Profile of the trainees
It is interesting to note that as many as 53% of those coming to learn driving in these
schools are women learners.

Road Safety as a subject is too vast and diverse and requires an integrated approach of
Government, Corporates and Civil Society.

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MARUTI SUZUKI EXPORTS

As a forward looking organisation, it has always stressed on exports to remain

competitive in global markets. An exposure of global markets always comes handy in
improving product quality and cost.

This is why, in 1986 despite a 3-year waiting period in the domestic market, it started
exporting cars, only to ensure that they remain competitive in terms of cost and quality.
Since then they have sold more than 450,000 cars to more than 100 countries of the
world.

Some of Maruti’s cars became bestsellers. Like Maruti’s old Zen- was projected as the
World Car and was very well received in Europe.

Similarly, Alto received rave reviews in Netherlands, Greece, Germany and Switzerland.
Alto's superb fuel economy entitled its customers to a 1000 Euro refund from the
Government of Netherlands.

However, due to adoption of new emission norms they had to temporarily suspend
Maruti’s exports to European countries and They began developing a new model for
European markets.

At present, they export entry level models to many Latin American and African nations.
With a heavy focus on Non-European countries Maruti’s has managed to bring
incremental sales and Maruti’s exports to these countries have grown by 47%, 65% and
40% in the past three years.

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CORPORATE RESPONSIBILITY

As a responsible corporate citizen, they feel they must plough back in the society that we
live in. They have set up guidelines for CSR activities, which include elements of
partnership, sustainability, employee involvement, and scaling up of activities from the
local to the national level. There is strict adherence to government labour legislations, and
there are defined policies for occupational health and safety, environment protection and
product quality. There is a dedicated department which overlooks the Corporate Social
Responsibility initiatives of the company.

Practicing the Art of Giving Back

 Adopting State Run ITI's

There is no better way to give back to the society than investing in education. They
offered to adopt four government ITI's in Gurgaon and develop them as Centers of
Excellence. The idea was to groom young unemployed youth of the state for the
automobile industry and give them requisite exposure on Maruti’s infrastructure and
increase their prospects of employability in the industry.

 GUJARATI - Employment opportunities with driver training

Recently, it also signed an MoU with Gujarat Government to set up country's first
Driving and Technical Training Institute for Tribal Youth. Maruti has also offered to set
up, manage and run The Gujarat Regional Automobile Training Institute (to be referred as
GUJRATI) at Gajadara village of Waghodia taluka in Vadodara district. The institute will
not only provide driving training to tribal youth, it will also offer automobile technical
training to them.

 Focus on Children Education

In addition, to the youth it has also entered in an agreement with the Delhi Public School
and opened two schools in Gurgaon.

The first, DPS Maruti Shiksha Kendra was initiated as a dream project to provide
education to children below poverty line from nearby villages of Gurgaon District.
Around 200 students in the age group of 4-12 years are given education here. In addition
to providing elementary education They have tried to provide complimentary books,
stationary items, uniform, healthy refreshments and transport facility to them.

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The second school, Maruti International School, was developed to impart good quality
education to employee children. The school runs in two shifts and also imparts education
to underprivileged children.

 Maruti’s next step

Soon after inaugurating Maruti’s World plant at Manesar, They decided to adopt villages
surrounding Manesar. They have adopted three villages in Manesar namely Kasan, Alihar,
Dhana (all located around the Manesar facilities)

The key areas of intervention where they feel they would be able to add value are as
follows:
 Basic Infrastructure
 Education
 Vocational Training
 Health Care

 Maruti’s Appreciation

The TNS Automotive Global Corporate Social Responsibility (CSR) study covered
corporations from passenger car, commercial vehicle, motorcycles, tyre & oil sectors. The
study is conducted across 18 countries and besides global rankings, country specific
rankings too are announced.

In India, Maruti Suzuki was ranked as the "Most Trusted" Company under Passenger
Globally, over 18,000 consumers participated in the study worldwide. The general public
perception of the automotive industry is taken with regard:
 Corporate ethics
 Social responsibility
 Environmental policies and
 Philanthropic activities
The study found that Safety and Environment amongst the most important issues and
corporations that rated highly on these are perceived to be most trustworthy.

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 Environment
While lending colours to Maruti’s cars they have been extremely conscious that Maruti’s
facilities and Maruti’s cars retain their Greenness to be environment friendly.
Commitment and responsibility towards environment comes from Maruti’s Green
Philosophy- which:
 promotes 3R's- Reduce, Reuse and Recycle,
 promotes energy conservation,
 encourages green procurement and
 provides education on environment to employees and their families.

 Green Philosophy
Adopting the powerful mantra of Smaller / Lesser / Lighter / Shorter / Neater has inspired
us to design & develop cars that are fuel efficient and environment friendly. They have
successfully launched alternate fuel cars and are steadily progressing towards new engine
series, which will help us bring EURO-V compliant cars on Indian roads.

Over the years, the approach has only refined and the results are both pleasing and
promising.

Despite increased production volumes there has been a consistent decline in energy
consumption. Thanks to numerous Kaizens and a concerted environment friendly
approach, Maruti’s total energy consumption per vehicle (during manufacturing) has
come down drastically by 26 per cent over the last six years.

In addition, power consumption has come down by 31 per cent while water consumption
per vehicle has dropped by 63 per cent over the last six years. Landfill waste has also
come down by 67 per cent over this period.

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REACHING OUT TO CUSTOMERS

Maruti’s customers have rated us first in J D Power's Customer Satisfaction Survey for
eight consecutive years.

When they achieved it first time in 2000, people were skeptical. They could not fathom
how could a market leader like us manage to keep happy such a vast and diverse group of
customers.

The answer perhaps lies in Maruti’s approach towards customer satisfaction. Being first
in a Customer Satisfaction rating was not just simply about winning an award. Rather, it
became Maruti’s weapon to fight and win in this competitive market place.
How they evolved Maruti’s approach?
There was a time( in late 1990's) when they faced some real competition with the entry of
global players into India.

They aren’t back to the basics: What was it that the Indian customer desired? Maruti had
the right products for India, ones with reliable quality, low cost, top performance and so
on. What else could they offer Maruti’s customers?

It was then that they decided to focus on Customer Satisfaction. Caring for the customer,
thinking from his and her point of view, building transparency in Maruti’s interactions,
orienting ourselves to face the customer's needs and concerns rather than the other way
round. If they could do all that, Maruti’s satisfied customers would recommend Maruti’s
products to their friends and relatives and themselves buy their next car from us. There
was nothing new about this strategy; all companies swear by customer satisfaction.

The challenge for us was to go beyond words and make it all work, convert intention into
action, translate an intangible mission to tangible benefits, evolve from random and one-
off customer benefit gestures to a consistent and systematic effort to satisfy the customer.

They had to strive to internalize Customer Satisfaction and make it a way of life for
ourselves.

Cars For A New India

Maruti has tried to keep pace with the changing lifestyle of Maruti’s customers by
bringing models high on 'style and design quotient'. Some of Maruti’s recent offerings
like the Swift, Zen Estilo (Spanish for Style) and SX4 have become popular choices
because customers find them relevant.

While designing contemporary cars and lacing them with latest safety features They have

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remained vigilant and cautious of pricing them aggressively for Maruti’s customers by
adopting a target cost approach.
TARGET COST APPROACH

Through continuous study and research Maruti has adopted a new approach towards
product planning and product pricing- Target Cost Approach.

They now begin designing products by keeping an aggressive market price in mind. They
work it backwards to arrive at target costs for different components, equipment and for
manufacturing operations. Growing design capability in the area of cars, components and
dies, both within the company and among suppliers, have helped us foster this 'target cost'
approach. That possibly explains why they are able to bring out fresh models with high
levels of localisation and aggressive pricing.

MARUTI’S FACILITIES
Maruti has two manufacturing facilities in India, one in Gurgaon and the other in
Manesar, North India.

 GURGAON FACILITY
Maruti’s facility in Guragaon houses three fully integrated plants. While the three plants
have a total installed capacity of 350,000 cars per year, several productivity
improvements or shop floor Kaizens over the years have enabled the company to
manufacture nearly 650,000 cars per year at the Gurgaon facilities.

The entire facility is equipped with more than 150 robots, out of which 71 have been
developed in-house. More than 50 per cent of Maruti’s shop floor employees have been
trained in Japan.

 MANESAR FACILTY
Maruti’s Manesar facility has been made to suit Suzuki Motor Corporation (SMC) and
Maruti Suzuki India Limited's (MSIL) global ambitions. Rated high among Suzuki's best
plants worldwide the plant was inaugurated in February 2007.

The plant has several in-built systems and mechanisms to ensure that cars being
manufactured here are of good quality. There is a high degree of automation and robotic
control in the press shop, weld shop and paint shop to carry on manufacturing work with
acute precision and high quality. In particular, areas where manual operations are
hazardous or unsafe have been equipped with robots.

The plant is designed to be flexible: diverse car models can be made here conveniently
owing to automatic tool changers, centralized weld control system and numerical control

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machines that ensure high quality. The open lay-out and ergonomic design make work
convenient and improve productivity.

The plant at Manesar is the company's fourth car assembly plant and has started with an
initial capacity of 100,000 cars per year. This will be scaled up to 300,000 cars per year. A
total investment of Rs 2,500 crore will be made in this car plant by 2010.
In addition, the Manesar campus would also have, for the first time in the Indian
automobile industry, a Suppliers' Park.

 DIESEL ENGINE PLANT

Suzuki Powertrain India Limited the diesel engine plant at Manesar is Suzuki & Maruti's
first and perhaps the only plant designed to produce world class diesel engine and
transmissions for cars.

The plant is under a joint venture company, called Suzuki Powertrain India Limited
(SPIL) in which SMC holds 70 per cent equity with the rest held by MSIL.
This facility has an initial capacity to manufacture 100,000 diesel engines a year. This
will be scaled up to 300,000 engines per year by 2010.

The diesel engines manufactured at this plant will also be exported to SMC companies
across the world.

This facility, too, has a high level of automation. Final inspection of components is done
through automatic measuring and marking machines, which leads to a uniform and error
free production.

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WORKING WITH SUPPLIERS

Maruti’s Suppliers Maruti’s Partners Maruti’s Strength

Maruti’s suppliers have been Maruti’s partners in growth. The joint initiatives taken by
Maruti and its team of suppliers have generated over 29% cost reduction over three years
for Maruti.
Participation has been the key to Maruti’s success. Through a participative and
collaborative approach called Value Analysis & Value Engineering, they have been
successful in bringing cost reduction across all Maruti’s models. The localization levels
are as high as 85 per cent.
Maruti’s supplier partners have been major contributors to Maruti’s turnaround. Less than
20 per cent of a car is manufactured in-house. The rest is accounted for by Maruti’s 215
suppliers and hundreds of second and third tier of vendors who, in turn, supply to them.
The underlying basis of Maruti’s relationship has been that rather than focus on "price
reduction" of the component, they have to work together to bring down the "cost" of the
component.
One of the ways to reduce their cost has been to replicate the Maruti Production System
on the shop floor of supplier companies. These techniques have been transplanted through
the Maruti Centre for Excellence. The suppliers, too, have been able to reduce wastage
and make their operations lean and efficient.
Rather than appropriate the entire gains, they have a system whereby suppliers keep a
part of the productivity and cost gains and pass on the rest in the form of a price
reduction.
The other route to cost reduction has been Value Analysis & Value Engineering, another
collaborative effort between Maruti’s suppliers and us

Involving Vendors At Development Stage

Another interesting initiative is the early involvement of suppliers. It triggers innovations

at the designing stage itself. Suppliers are being trained to evolve as innovation drivers by
engaging them at new product designing stage.

Perhaps that is reason why Maruti’s models now are launched with as high as 90 per cent
levels of localization.

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MARUTI’S CURRENT SCENARIO

SALES FIGURES
Car market leader Maruti Suzuki India Limited sold a total of 63,822 vehicles in February
2008. This includes 4,511 export units.

The company had sold 62,999 units in February 2007. Domestic sales in February 2007
were 59,095 units.

Maruti’s volume in the domestic A2 segment went up by 2.7 per cent, while in A3
segment the domestic volume grew by 8.9 per cent, compared to sales in February 2007.

During February 2008 the company became India's first car manufacturer to export 5 lakh
cars cumulatively.

February Till February

April'06 -
Segment Models % 2007- 2006-
2008 2007 %change March'07
Change 08 07
A1 M800 5745 5955 -3.5% 63200 73104 -13.5% 79245
C Omni, Versa 7268 8069 -9.9% 81688 74430 9.8% 83091
Alto,
A2 Wagon-R, 44059429132.7% 457411 39330716.3% 440375
Zen, Swift
SX4,Esteem,
A3 1958 1798 8.9% 41799 27283 53.2% 29697
Baleno *
Total Passenger Cars 59030587350.5% 64409856812413.4% 632408
Grand Vitara
MUV 281 360 -21.9% 3299 2949 11.9% 3221
*, Gypsy
Domestic 59311590950.4% 64739757107313.4% 635629
Export 4511 3904 15.5% 47149 32079 47.0% 39295
Total Sales 63822629991.3% 69454660315215.2% 674924
• SX4 launched in May 2007, Grand Vitara launched in July 2007, Baleno figures
are for 2006-07

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FIRST INDIAN COMPANY TO EXPORT HALF MILLION CARS

Car market leader Maruti Suzuki India Limited has achieved another significant
milestone today. The cumulative exports of India’s leading carmaker today crossed half a
million mark i.e. 500,000 units.

As the ship liner, “Goliath Leader” left Mumbai port on 28th February, carrying 1180
Maruti cars to various Latin American countries, Maruti Suzuki became the first
carmaker in India to cross the 500,000 units of export.

While Maruti Suzuki cars ply in all five continents, Europe has been a popular destination
accounting for 56 per cent of the company’s cumulative exports. Netherlands with 67,700
units followed by Italy (over 41,000) and UK (over 34,000) have been the biggest
European buyers. Germany and Hungary too are among the countries that have imported
over 20,000 Maruti Suzuki cars.

Amongst the non-European markets, Algeria is the biggest buyer with over 42,000 units,
followed by Chile, Sri lanka and Nepal.

Just as in the Indian market, the Maruti 800, with 178,000 units, has been the most
popular Maruti car overseas. Alto follows closely with 152,000 units. “Zen”, India first
world car that was exported to Europe as early as 1994, was well received selling over
130,000 units cumulatively.

Next Step: Hub for World Strategic Model

In the light of Maruti Suzuki’s growing role in Global Suzuki, the company has set up a
state of art assembly plant at Manesar with an initial capacity of 100,000 units. The
Manesar plant production capacity is planned to be increased to 300,000 units in the next
two years.

Maruti Suzuki will manufacture Suzuki’s fifth World Strategic Model, A-Star, for export.
The production model will be based on the Concept A-Star, unveiled at the recent Auto
Expo in Delhi. The company plans to export 100,000 units annually of this new model, to
Europe and other parts of the world.

Earlier in February Maruti Suzuki tied up with Mundra port for development of dedicated
port facilities for export shipments of cars through Pure Car Carriers. The new facility is
expected to be operational by December 2008. Maruti Suzuki plans its first export
shipment from the new port facilities in January 2009.

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CAR PRICES REVISED

Car market leader Maruti Suzuki India Limited has announced a moderate increase in the
prices of its range of cars.

The increase ranges between Rs 1,000/- to Rs 11,000- (Ex-Showroom, Delhi) and is

effective across all cities and is applicable to most of its models.

In early January 2008, the company had refreshed the Swift model (Petrol and Diesel)
and had increased its prices.

Following are the revised prices of some Maruti vehicles:

Model Pre-revision Ex- Revised Ex- Change (Rs)
showroom Price (Rs) showroom Price (Rs)
M800 Std 197092 198092 1000
M800 A/c 218331 219331 1000
Alto Lx 271522 274022 2500
Alto Lxi 290184 292684 2500
Zen Estilo Lxi 352822 354822 2000
Zen Estilo Vxi 377954 379954 2000
Wagon R Lx 331429 334929 3500
Wagon R Lx LPG 353232 354232 1000
Duo
Wagon R Lxi 356256 359756 3500
Wagon R Lxi LPG 381053 382053 1000
Duo
Wagon R Vxi 380062 383562 3500
Omni 5 Seater 224703 227203 2500
Omni Cargo LPG 200122 202622 2500
Omni 8 Seater 226664 229164 2500
Versa Std 365465 369465 4000
Versa Dx2 476200 480200 4000
Gypsy King Hard 512351 522351 10000
Top
Gypsy King Soft Top 493009 503009 10000
SX4 Vxi 618000 629000 11000
SX4 Zxi 689000 700000 11000

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SX4 Zxi (Leather) 724000 735000 11000

MARUTI’S NANO

New Export Model - Concept A-Star

Concept A-Star is the upcoming export model that has been developed by Maruti and
Suzuki Motors Corporation jointly. Production of this world car will begin in October
2008, at Maruti's Manesar Plant.
Today is the era of cheaper cars, not of the king-size, luxurious and costly ones. One by
one every car maker has announced their small and cheaper car to compete with the much
hyped 'Tata Nano', which is expected to over turn the Indian car market. Now it is the turn
of Maruti Udyog Limited, India's leading car maker, to add to the row of cheapest cars
and unofficial reports state that soon a car priced in 1 lakh bracket will roll out of the
company. Earlier, at the launch of Tata Nano, Maruti had denied any plans of
manufacturing an ultra low cost car that could compete with Tata"s car and squashed
reports of a possible price cut on its flagship Maruti 800. But alarmed by the expected
revolution that may hit Indian car market by the launch of Nano, They are reported to
have changed the mind and the market expects a small and cheaper car from Maruti.
As the commencement, Suzuki Motor has recently launched a mini car named Cervo in
Japan, which is powered by a 660cc engine offering 54 bhp. Its turbo-charged variant
offers 60 bhp, more power than the Alto and the Maruti 800 and nearly the same as
Wagon R"s 64 bhp. Cervo meets Japan"s 4-star emission standards and exceeds the 2010
fuel economy standards by about 10%. And the same car is expected for India too, of
course with necessary changes.

The new model is part of MUL"s flanking strategy against Tata Motors" Rs 1-lakh car,
scheduled to hit the market by 2008-end, if Maruti goes forward with the plan. The other
flank will be the new 660cc small car being developed at Suzuki"s headquarters in
Hamamatsu, Japan. The new Maruti 800 will be on the existing platform but would sport
a more contemporary look, entirely different from the current product. Both cars are
likely to be priced aggressively against Ratan Tata's dream car, Nano.

Maruti's car may hit the market in 2008, around the same time that Tata Motors plans to
launch its new small car. “They are working on a mini car which would be lower than
800cc in engine capacity," Maruti"s director, sales & marketing Shuji Oishi commented
about the car.

The Suzuki and the Tata cars will be the first sub-800cc cars in the Indian market. The
Suzuki car will offer over 50 bhp power with a 660cc petrol engine. In comparison, the
Tata small car is expected to offer 30 bhp with a 700cc petrol engine.

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Reliable sources say that the Maruti vehicle will be a geared, front-wheel driven car,
“Maruti’s car will be far more fuel-efficient than any car in the segment," Oishi said.
SWOT ANALYSIS OF MARUTI UDYOG

STRENGTHS

 Established distribution and after-sales networks:-

Maruti Udyog has its distribution centers all over the India and it delivers outstanding
after sales service to the customers.Thatswhy Maruti people has faith in the name Maruti

 Understanding of the Indian market and ability to liaison with the government:-

Maruti Udyog understands the Indian market in a very good manner. It knows what
exactly Indian people need and provide it accordingly. Maruti Udyog has a lot of ability
to liaison with the government

 Ability to design products with differentiating features:-

Maruti has produced the different models of their cars. Maruti Udyog has been producing
cars for middleclass range, higher class range so it is fulfilling needs of all classes of the
country. Maruti also gives various and different features in their cars.

 Brand Image:-

Brand image is the important thing for any business. Maruti Udyog ahs created its own
brand image in the country. Today Maruti Udyog has developed their different image in
the mind of people.

 Experience and Know-how in technology:-

Maruti Udyog has collaborated with Suzuki, the Japanese company.With this
collaboration, Maruti has brought hi-tech technologies in their past models and also using
some modern techniques in their upcoming models.

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WEAKNESSES

 Lack of experience with the foreign market:-

Though Maruti Udyog has their name in Indian market, they are not having experience
with foreign market. When exports of any products starts or increases company gets lot of
revenue in foreign currency.

 Inexperience with foreign workforce

If any company recruits foreign experts or foreign technicians who know have better
technical knowledge then it helps in product development in more efficient way.But
Maruti is not that much experienced with foreign workforce.
.

 Heavy Import tariffs:-

Maruti Udyog spends a lot on import tariffs on imported spare parts. It increases the cost
of product. Though same thing happens with other companies Maruti incurs more tariffs
compare to other companies.

OPPORTUNITY

 Increased purchasing power of Indian middleclass category:-

Now a days situation has been changed. Now even Indian middle class people can also
afford the luxuries like cars. Their purchasing power is increased so there is lot of scope
to Maruti Udyog to increase their volume.

 Govt. subsidies:-

Maruti Udyog gets a lot of subsidies from Govt. So its good opportunity for Maruti
Udyog to reduce their cost which gets increase due to various tariffs.

 Tax benefits

Tax benefit is an important opportunity for any company. Same way Maruti Udyog gets
tax benefits from Government which helps them to increase reserves and use it into the
research and development and other activities.

 Foreign collaboration

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Due to collaboration with Suzuki company, Japan, Maruti has got various foreign
techniques which helps in product development.

THREATS

 Threats from Chinese manufacturers:-

Actually speaking this threat is not only to Maruti Udyog but also to all four wheelers
manufacturers in the world. Chinese are well known in producing best quality product in
less cost.

 Indian as well as foreign competitors:-

Since this is globalized world, there are various Indian as well as foreign competitors to
Maruti. Indian companies like Tata, Mahindra and foreign companies like Daewoo,
Toyota are doing well in this industry.

Market Applications & Practices – Prof Varahan 30