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Maruti Udyog Limited
Term Paper submitted by: Jaspreet Singh Mithra MBA / 13 / 2005
1. Phase I
1.1 Evolution of the Indian Passenger Car Industry 1.1.1 Maruti’s Entry into the Indian Passenger Car Markets 1.1.2 Dynamics of Market 1.2 Car Market Classification 1.2.1 Price Based Classification 1.2.2 Length Based Classification 1.3 Maruti’s Offering & Competitors in Different Segment 1.4 Factors Determining Competition in Indian Passenger Car Industry 1.5 Factors Affecting Demand for Indian Passenger Car 2. Phase II 2.1 Industry Overview 2.1.1 Global Passenger Car Industry 2.1.2 The Indian Passenger Car Industry 2.2 Sector Outlook 2.3 Future Scope 3. Phase III 3.1 MUL’s Vision 3.2 MUL’s Business Strategy 3.3 MUL’s supply chain 3.4 Information Technology 3.5 Marketing 3.6 Research & Development 3.7 Manufacturing
and in October 2001. The intention of the venture was to produce a 'people's car'. as provided for in the appropriate enactment of GoI together with the liabilities of GoI so far as they are related to the Undertakings of the Company. Subsequently. In April 2003. 1983 that MUL launched the first Maruti vehicle . In the years that followed. A year later. Versa. Baleno targeted the premium mid-segment while WagonR was positioned as a multi-activity vehicle. operational efficiency and customer intimacy Maruti Suzuki has been the leader in Indian passenger car market.the Maruti 800. in October 1990. 4 . the Grand Vitara XL-7. It was on December 14.1 import in Europe' (1997) and 'most fuel-efficient car' (ADAC). Maruti Suzuki introduced Alto .500. 'No. MUL took the lead in the green drive by launching its CNG-run Omni and Maruti 800 in 1999. To get the project off the ground MUL took over the assets of the erstwhile Maruti Ltd. and. economical cars for the masses. which was set up in 1971 and closed in 1978. The first model was the SS80. MUL rolled out its latest offering. such as the eight-seat Omni. During that period the passenger car industry in India grew at a nominal CAGR of approximately 3.To acquire and take over from GoI the right. Hindustan Motors and Premier Automobiles with limited production capacities.. 47. Available in vibrant colures when India's passenger car population comprised mainly Ambassadors and Fiats in black and white. converting Maruti into a non-government company. in spite of price hikes. The rate of customs duty levied on cars was 225%. 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. the Zen had won several awards.6%. to improve customer satisfaction. The import of passenger cars was restricted to the State Trading Corporation (STC) and foreign diplomats. In 1999. a multipurpose vehicle. 1 car in Europe' (Auto Week. It was the company's first 'world car. Since 1980 with its product excellence. it even established a chain of model workshops and soon after. Suzuki increased its equity stake in MUL from 26% to 40% and further to 50% in 1992. selling across multiple markets. MUL consolidated its position with a line of Indian classics. In May 2002. 1994). MUL redefined the premium compact segment with the launch of the Zen in October 1993.a premium small car targeting the export market . a 3-box Maruti 1000. In 2000. the car has remained within the reach of the Indian middle class and has been a runaway success. MUL launched Baleno and WagonR. including 'No. Suzuki took management control of Maruti. title. In1999. and interest in relation to the undertakings of Maruti Ltd. Main objectives of MUL as set forth in their Memorandum of Association are: 1.Evolution of the Indian Passenger Car industry: During 1960s and the 1970s there were only two manufacturers in the market. In late1980s. The Grand Vitara was a concept that was radically different from the models that comprised the bulk of MUL's sales. M800 gave Indians the first taste of global quality and reliability. a luxury SUV imported from Suzuki Motor Corporation. set up customer call centers in the metros. the rough-terrain Gypsy. a 796cc hatchback car priced at Rs.
5 . and manufacturers of machinery. diesel. boiler makers. animal. In the last quarter of 1998 these new entrants in the market had launched an unprecedented assault on the B segment of the market. and working of motors and other things or in the construction of any track or surface adapted for the use thereof. maintenance. iron and steel converters. buses. utensils. motorcycles. enamellers. chassis-bodies and other components. spirit.To carry on in the business of iron founders. To carry on the business of manufacturers of. electrical. parts and accessories and all machinery. sea. solutions enamels and all things capable of being used for. • • Daewoo launched the Matiz Hyundai launched the Santro. motorcars. builders. automobiles. mechanical engineers. wood workers. including Hyundai. tool makers. lubricants. cements. scooters. appliances.030. Share Holding Pattern After MUL IPO: 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. lorries. Indian car market is one of Asia's largest and most competitive markets. lacquerers. amphibious vehicles. and dealers in. Santro Xing specially created a fresh excitement in the B segment. or in connection with manufacture. or in the air or in any combination thereof and vehicles of all descriptions (all hereinafter comprised in the term “motor and other things”).2. electroplaters. chromium platers. 3. smiths.To carry on the business of garage keepers and suppliers of and dealers in petrol. gas. And as such Maruti is having a tough competition from the new players.068 passenger cars. whether propelled or assisted by means of petrol. steam. cycle-cars. metallurgists. multi and sports utility vehicles were sold during 2003/04 resulting in the market growth of about 32%. 4. and printers and to carry on any branch of manufacturing and engineering business. 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. apparatus. electrical engineers. or other power. and of internal combustion and other engines. Over 1. implements. electricity and other motive power for motors and other things. According to the statistics available. and vehicles suitable for propulsion on land. metal workers. brass founders. painters. vans. motor. carriages. mill rights. in. GM and Honda of Japan. machinists.
it was expected to click. But the Versa bombed. MUL's brand value had begun to erode. it is finding itself unable to cope with the frequent upgrades and relaunches. Talking in terms of absolute figures Maruti Suzuki's share declined from 61. Launched with sales expectations of a 1.30 lakh even as total industry volumes (cars and utility vehicles) have shown a compounded annual growth rate of 5 %. the interference will not decrease as seen with other institutions like VSNL and MTNL. et al. of which the latter two have still to make a mark.000 per car). 6 .000 units every month. It seems that even consumer are having problem equating Maruti with premium.53 lakh to 3. Life. Maruti's share in this segment has fallen from 30 per cent in 1999-00 to 16 per cent in 2002-03. It is seen as a small-car maker only. The other launch. the Baleno. a major reworking every two to three years.Esteem. General Motors is also planning to launch new variants. Maruti was having nothing to offer to the booming market for people carriers in India . Launched as a higher end alternative to the Omni. went up against the Hondas and the Mitsubishis. This is particularly important as Tata Motors is serious about an entry-level car at Rs 1 lakh. Hyundai has also launched Getz. Over the years. and lost money from Day One. it did about 100. Versa and the Baleno. Fiat slashed the prices of its Uno and launched a Diesel variant. Fiat has reworked the engine of the Palio and is planning to launch another B segment product. It is also predicted that Honda Motors India will be also launching its small car.000 to Rs 4.• • • • • • Telco launched the Indica Around the same time. in India. And then. Since MUL had exhausted all of Suzuki's high-end products. Considering Hyundai's emerging status in the Indian market and the lack of government involvement. For this segment Maruti launched Versa. Along with the intense competition there are other factors which have made the conditions worse for Maruti • • • After almost 18 years.6% in 2003 and finally to 51% in 2005.Sumo. and are replaced every four or so years. it could turn out to be a better pick than Maruti. Maruti Suzuki is also having great difficulty in keeping its profit growing as A segment. Even when the government's stake in Maruti has come down. Its volumes have dropped from 3. • • • • • • • • 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. Qualis. the Zen has remained almost unchanged since 1993.Maruti currently has three cars in segment C -. In an industry where cars get minor facelifts every year.2% in 1999 to 54. there are Honda and Toyota. Maruti is also facing problems linked to its higher end mid-sized (segment C) models. in which Maruti Suzuki is the only player has margins as low as 1-2% (Rs 2. the 800 is on its last legs.
They are clearly showing that if MUL has to continue with its position of being market leader it has to take some of the big steps.Industry & MUL passenger car volumes in India The above graphs clearly show the blood bathed condition of MUL. 7 .
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.500mm Segment A4 (Executive)– cars having a length of 4. 8 .400mm Segment A2 (Compact) – cars having a length of 3. 300.4. 300.001.000 Segment D – cars priced between Rs.5. 2.000mm Segment A6 (Luxury) – cars having a length of more than 5.000 Segment E – cars priced above Rs.701.401. 2.000.000 and Rs.000 and Rs.500. Passenger cars • • • • • • Segment A1 (Mini) – cars having a length up to 3. The new segmentation of passenger vehicles is as follows: 1.000 and Rs.000mm Segment A3 (Mid-size) – cars having a length of 4.501.4.000 Segment C – cars priced between Rs. 1. 1. Utility vehicles • Weight upto 3.000 Segment B – cars priced between Rs. 4. 500.5 tonnes). 500. in order to establish a uniform industry standard. The different price segments used by Maruti were as follows: 1.700mm Segment A5 (Premium) – cars having a length of 4.000mm 2.5 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 upto 3. Segment A – cars priced lower than Rs. 3.000.Car Market Classification: Before going further it is necessary to understand the Indian car market classification and the segments in which MUL operates.000 Length Based Classification: In April 2002. SIAM introduced a new segmentation of cars on the basis of the length of the cars. 5. 2.4.500.
C Class A6: Luxury E 250 S Class E E E B C B C C C D C C C B C C D C C B D C A A5: Premium S Class A2: Compact A3: Mid-size A2: Compact A3: Mid-size A3: Mid-size A3: Mid-size A5: Premium A3: Mid-size A3: Mid-size A3: Mid-size A3: Mid-size A4: Executive A3: Mid-size A5: Premium A3: Mid-size A3: Mid-size A2: Compact A5: Premium A3: Mid-size A1: Mini 2. Hyundai Motor Company Ltd. Maruti 1000 Maruti 800 9 . Accent Santro Sonata 8. Accord City 7. Escort Ikon Mondeo 4. Ltd. Fiat Palio Fiat Siena Fiat Uno Palio Adventure 3. Daimler Chrysler India Pvt. Ltd. General Motors India Ltd. Ford India Ltd. Fiat India Automobiles Pvt. Opel Astra Opel Corsa Opel Swing 5. Maruti Udyog Ltd.Maruti’s Offering and Competitors in Different Segments: Manufacturer Name of the Model Segment as per length-based classification A4: Executive Segment as per price-based classification 1. Honda SIEL Cars India Ltd. Hindustan Motors Ambassador Contessa Lancer 6.
Premier – Padmini Octavia Indica Skoda Auto India Pvt. 12. Tata Engineering & Locomotive Company Ltd A2: Compact B 10 . 11.Maruti Swift Alto Baleno Esteem WagonR Zen Versa Omni A2 : Mid size A2: Compact A3: Mid-size A3: Mid-size A2: Compact A2: Compact Utility vehicles Utility vehicles A3: Mid-size A3: Mid-size A2: Compact B C C B B C A B C A D 9. PAL-Peugeot Ltd. Ltd. Premier Automobiles Ltd. 118NE Peugeot 309 10.
Availability and cost of consumer financing 11 . The availability of value-added after sales services. Factors Affecting Demand for Indian Passenger Cars Demand for cars depends on a number of factors.Certain Figures about MUL: Factors Determining Competition in the Indian Passenger Car Industry • • • • • • • Price Brand image Product performance New model launches Distribution network After sales support. The key factors affecting demand for passenger cars in India are: • • • • • • • Fuel costs Prices of cars Per capita income Introduction of new models Incidence of duties and taxes The quality of road infrastructure.
PHASE II 12 .
The Indian Passenger Car Industry: 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. such as US. which is an indicator of the per capita income. Japan and countries in Western Europe. had higher levels of new car registrations. 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. Implications of Global Trends on the Indian Passenger Car Market As a result of rising household income and decline in interest rates. has been shown below: As shown in the chart. or PPP.000. 500. had lower levels of new car registrations. with higher income levels. with lower income levels. New Automobile Policy In March 2002. The highlights of the policy and its effects on the manufacturers are: 13 .Industry Overview: The Global Passenger Car Industry: Emerging Markets Income level is one of the key factors affecting new car purchases. while emerging economies. GoI announced the new automobile policy or NAP. developed economies. The relationship between gross national income per capita measured in terms of Purchasing Power Parity. With rising income levels in the emerging markets it is likely that the number of new car registrations will also increase. in 2000. and the number of new car registrations per 1000 persons in various economies. India is generally believed to have a high GDP growth potential aided by low cost of production and availability of skilled manpower. many global manufacturers have entered the Indian market. such as India and China. along with current low passenger car ownership density.
Kanpur and Agra by April 2005 and Euro IV equivalent norms by April 2010. 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.• • • • • • Requirement of minimum levels of indigenization was removed. Kanpur and Agra and from April 1. requirements of certification from notified agencies regarding various matters. Up to 100% equity ownership in Indian companies by overseas manufacturers was permitted. Hyderabad Ahmedabad. based on the recommendations of the Mashelkar Committee Report. 2003 to the cities of Bangalore. Bangalore. Mumbai. Pune. 2005 to the whole of India. At present. Since April 1. Euro Stage III equivalent emission norms are to be made applicable to the cities of New Delhi. and 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. In addition. Pune. Kolkatta and Chennai. all QRs on automobiles are removed and imports of all categories of new and used cars are allowed. GoI has been developing a regulatory framework to reduce pollution from cars. Kolkata. Tax incentives. 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. Surat. Requirement of minimum export commitments was removed. restriction on the port through which the imports are allowed. 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. age of vehicles and specifications about quality and sales of fuels. GoI has announced the environmental policy for automobiles. These environmental regulations are increasingly driving technology innovation in the passenger car market. 14 . 2001. Environmental Policy Under the NAP. as applicable from 2000. Chennai.8 meters in length in order to establish India as the centre in Asia for the export of small cars. Trade Regulations The World Trade Organisation (WTO). automatic approvals for investment by overseas entities in Indian entities Concessional duty on import of equipment was provided to entities setting up of automotive design firms in India. The framework as introduced by GoI. In addition. 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. pplication of Bharat Stage II norms are from April 1. Hyderabad. Fiscal incentives were provided for cars less than 3. through a phased introduction of emission norms. GoI notified norms relating to emission by vehicles. road taxes are levied at the time of purchase and are based on the size of the vehicle. is as follows: • • • • Sale of only Bharat Stage II compliant cars in the cities of Mumbai. Environmental Regulations The Environment Protection Act. Ahmedabad. New Delhi. Surat. does not allow quantitative restrictions or QRs (such as import licenses and import quotas) on foreign trade. of which India is a member. in order to discourage the use of old vehicles.
this segment is expected to post a CAGR of 2.5%. Segment B 15 . According to SIAM estimates. substantial investments are required to produce appropriate quality of fuel and vehicles. Between fiscal 2002 and fiscal 2007. equipment and machinery needed for the upgradation of technology/facilities Excise duty on indigenously manufactured capital goods.7%. 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. bio-diesel. • A roadmap for the implementation of vehicular emission norms and automobile fuel quality. CNG. like di-methyl ether. 180 billion would be required to produce Euro-III equivalent petrol and diesel. and • Putting in place other cost effective measures. GoI has also indicated that in the future additional safety norms will be made applicable to passenger cars to align them with international standards. equipment and machinery needed for upgradation 100% depreciation on plant and machinery set up for upgradation Soft loans for technology modernization/upgradation projects. the test facilities currently available in the country are inadequate to meet the new regulations. such as tariff differentials and other measures to enable the domestic industry to compete with imports. Also. the entire Indian passenger car market is expected to grow by approximately 9. and Financial incentives to the manufacturers and users of electric vehicles in order to make these vehicles competitive. 170 billion. 2003. Adequate incentives. need to be encouraged. 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. such as a comprehensive inspection and certification systems for in-use vehicles with private sector participation. Segment A This is the entry-level and the most price sensitive segment. electric and fuel cells. new noise control norms for passenger cars were notified by GoI and became effective from January 1.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. Maruti is the sole manufacturer in this segment since fiscal 2000. traffic management and construction of bypasses. hydrogen. the cost of setting up additional facilities to test vehicles as per the new regulations would be around Rs. In order to meet the new emission norms. In addition. giving the choice of fuel and vehicle technology to the customers. Hence. fitting emission reduction devices in-use vehicles. • Vehicles running on alternative fuels.4 billion (excluding the cost of setting up inspection and certification centers). 10. largely as a result of increasing demand for segment B cars. Safety norms GoI has notified the requirement for use of safety belts in all cars. LNG. Sector Outlook Between fiscal 2002 and fiscal 2007. An additional amount of around Rs.
Segment C. 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 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. 4. a highway connecting the four metropolitan areas of Kolkata. There is also a large population of two wheeler owners. Hence the Indian auto market is at an interesting juncture where both challenges and opportunities are immense. which is even less than some of our neighboring countries. 16 . favourable regulatory framework. UV’s have a higher share than what they did in the earlier years. At present. In USA for instance. high aspirations and status associated with larger cars. • • Future Scope: 1. 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. are the key factors affecting demand for cars in these segments. Hence in the future there will be more and more demand for UV’s hence an opportunity for MUL. 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. robust economic growth. lower fuel economy and higher maintenance costs. In fact. The enabling factors for Indian passenger car industry are all in place namely. availability of affordable finance and improvements in road infrastructure. Due to the present low per capita income in India. high growth rates of 11%. who would naturally upgrade to an entry-level car. such as the Golden Quadrilateral Project. which could impact the auto industry. The compact cars will continue to dominate the passenger car industry in India. However. The Pre-Owned Car Market The size of the pre-owned car market in India has been estimated to be more then the size of the new car market. These segments typically have low sales volumes. there are some uncertainties like the growing higher oil prices. are expected between fiscal 2002 and fiscal 2007. car penetration in India is about 7 cars per 1000 people. The highway and road construction projects. UV’s account for 50% of the total Passenger vehicles market and in Indonesia they account for 80% of the market. D. New model launches. growth in per capita income levels. 3. New Delhi. It is still lower compared to some of the developed countries. respectively.3%. Therefore there is large latent demand for passenger cars waiting to be tapped. 2. the price and cost of ownership of cars are significant factors that affect demand for cars in this segment.This segment is expected to grow to 57.6% of the Indian passenger car market by fiscal 2007 at a CAGR of about 12. Mumbai and Chennai. therefore. (2) A more convenient means of selling or exchanging pre-owned cars and (3) The availability of adequate warranties. 19% and 35%. Passenger car sales account for over 77% of total passenger vehicle market and UV’s account for the balance. Mid-size and large cars are less popular in the pre-owned passenger car market primarily due to faster depreciation in value. Availability of better road infrastructure will also affect demand for cars. and E There are 11 manufacturers with approximately 20 models in these segments. 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.
PHASE III 17 .
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. In November 2001. which are manufactured using the same assembly line as that for the domestic market. MUL was one of the first automobile manufacturers in the world to receive the ISO 9001:2000 certification. Maruticertified pre-owned cars available for purchase. 2001 and 2002. marketing and other practices and standards.Power Asia Pacific. B and C. In addition. They are the major manufacturer of cars in segment A (priced below Rs. J. and still continues to have the very high sales volumes.MUL’s Vision The Leader in the Indian Automobile Industry. • • • • 18 . Extensive product portfolio. 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. 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. and leasing and fleet management. MUL’s Core values • • • • • Customer Obsession Fast.000). Inc. with respect to their products.300. the Zen. they have access to globally respected technology in the small car segment. the development of their supply chain and the training of personnel. Their dominance in segment A and extensive product range in segment B enables them to offer the customer a wider choice in the small car segment than any of their competitors. They have the advantage of Suzuki’s expertise in all aspects of small car technology and design. As a subsidiary of Suzuki. the absence of any major manufacturers in segment A gives their dealers greater flexibility in promoting models in segment B. manufacturing processes and business practices. and utility vehicles.. automobile insurance. They benchmark their products against international quality standards. 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. Their diverse product range includes cars in segments A. strive to increase customer satisfaction through quality products and new initiatives. the Alto and the WagonR. 300. The Maruti 800 has been the largest selling car in India for several years. Quality products.D. and promote the financial strength of their sale network. They also manufacturer three distinct models. They export heir products to approximately 70 countries. 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. Creating Customer Delight and Shareholder's Wealth.500.000 and Rs. A pride of India. and To continue to benchmark themselves against improving global manufacturing. MUL’s Competitive Strengths • Expertise in small car technology.000). in segment B (priced between Rs.
This has enabled MUL to increase the proportion of locally xsourced. lower cost components in their models. Skilled labour and experienced management. As of the same date. The facilities have advanced engineering capability and each plant is upgraded on an ongoing basis to improve productivity and quality. 1 in the “Economy”. including training by Suzuki. who together supply a substantial portion of the purchases of components. MUL has reduced the number of vendors of components in India from 370 as of March 31. which assesses customer satisfaction with product quality and dealer service. 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.ranked MUL the No. Vendors located within a radius of 100 kilometers from the facilities supply the majority of the components. 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. a concept refer to as localization. Their manufacturing facility consists of fully integrated plants with flexible assembly lines located at Gurgaon. 1 in the India Customer Satisfaction Index. 2000 to about 100 as in 2005. for 2002. they had strategic equity interests through joint venture agreements in their vendors. The labour force at MUL has become increasingly productive in terms of vehicles produced per employee and receives training on an ongoing basis. 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. NFO Automotive’s 2002 Total Customer Satisfaction Survey ranked Maruti products as No. • Strong vendor base and higher rates of localization: In order to improve quality and generate economies of scale. “Premium Compact” and “Entry Midsize” segments respectively. A number of their vendors are their dedicated suppliers in that they account for a majority of their turnover. • 19 . • Integrated manufacturing facility.
Continuous benchmarking of manufacturing capabilities: MUL continuously benchmark. such as increasing the number of sales executives employed at dealerships.000 branches across India. which has enabled them to reduce costs and has increased the flexibility in pricing. Their agreement with the State Bank of India. and continues to be. wide network of MASSs primarily provides aftersales service. it is expected that MUL will ultimately be having the capability to have full model change capability. while offering products in most segments of the Indian passenger car market. Continue to reduce costs to offer more competitive products. Currently. . Cost competitiveness has been. or SBI. They can even use the MASSs that are located in some of the more remote areas of India as sales outlets to increase the reach and penetration in those areas. . its facility to improve its operating efficiencies. . The following products and services offered by MUL: . reducing 20 . which can contribute greatly to the customer satisfaction and confidence. with that of Suzuki’s premier one. Increase availability of automobile finance. 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.Accessories. As part of Suzuki’s plans to make Maruti its research and development center for cars in Asia (outside Japan). more than 9. They continuously assist their dealers in enhancing their performance and profitability by suggesting improvements.Leasing and fleet management. MUL has one of the extensive sales and service network in terms of geographical spread. 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. finance products of eight select finance companies under the brand “Maruti Finance”. They are trying to make available to the customers a wide range of Maruti-branded services at different stages of ownership. The business strategies of MUL are: Maintain and enhance the product range.MUL’s Business Strategy MUL intend to continue to focus on the small car segment. This increases the availability and transparency of the financing transactions. They intend to increase the number of variants of existing models in the A and B segments Increase reach and penetration. to expand the size of the market by offering competitively priced.Extended warranties. with any new model. high quality products.Maruti-certified pre-owned cars available for purchase.Automobile finance. as the leading manufacturer in the small car segment. central to MUL’s strategy. This helps them to secure repeat purchases by the existing customers and increase the revenue. in terms of sales volumes across India. 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. and penetration. Secure repeat purchases by offering a “360 degree customer experience”. . A look at the new models tells that MUL. They have made available. tries to have a minimum of 75% localization level and then tries to increase the same to at least 90%. and .Automobile insurance. to provide the finance to their customers has enabled it to leverage the strength of the extensive network of SBI. MUL being the market leader should seek opportunities to expand the size of the Indian passenger car market. through the dealers. especially in the small car segment. MUL is extensibly trying to provide customers with a “one-stop shop” for automobiles and automobile-related products and services. 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.
widely available through the extensive sales and service network. insurance. and extended warranties.MUL tries to reduce the initial cost associated with the initial investment. introduction of flexible welding lines that can be used for multiple models. which comprises the cost of purchase. price cars. including spare parts and repairs. 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. spare parts and accessories. 21 . Reduction in number of vehicle platforms MUL currently uses six basic vehicle platforms for production. which also reduces the costs of the components being required by MUL. . fuel-efficient. accessories and repairs. and reducing their inventories. fuel consumption. MUL is trying to achieve this by: • • • • manufacture high quality.the number of their components that are rejected. This helps in reducing the costs of production. and resale value. reducing materials handling. improving their yield from materials. maintenance. competitively. MUL works in association with the vendors to reduce their warranty cost. 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. including spare parts. make maintenance services. Lowering the cost of ownership: MUL seeks to reduce the Consumer’s cost of ownership of their cars. and in-house development of machine shop equipment . make automobile finance more easily available to the consumer on competitive terms. Reduction in initial investment cost Through in-house development and localized sourcing of dies. welding jigs and other equipment. cars.
the customer is encouraged to use their dealers and purchase MGP. Maruti Insurance Brokers Ltd and Maruti Insurance Distribution Services Ltd. a joint venture between Maruti and Citicorp Overseas Investment Corporation Ltd. and Create a market for Maruti-certified pre-owned cars through “Maruti True Value” business. and pre-owned cars. business development. under the brand “Maruti Finance”. they had to nominate SBI as their preferred financier for customers who purchase Maruti. Maurti entered into an agreement with SBI. Maruti earns sourcing revenues from insurance companies for each customer using “Maruti Insurance”. The credit evaluation of the customer and the loan disbursement to the customer is at the discretion of SBI. In the nine months ended December 31. They are aiming to provide customers with a “one-stop shop” for automobiles and automobile-related products and services. Maruti Countrywide Auto Financial Services Ltd.• • offer automobile insurance and other automobile-related services through the sales and service network. conduct promotional activities and generate car loan business. New Business Initiatives As the largest manufacturer and leader in the small car segment. Maruti uses the services of four key alliance partners in order to 22 . which they believe contributes to customer satisfaction and confidence in their brand. the customer is provided with the benefit of a cashless transaction in respect of the repairs or spares that are covered by the insurance policy. Since January 2002. leasing and fleet management. 2002. due to the availability of this benefit. have entered into alliances with insurance companies. automobile finance. through their dealers. Maruti had made available. Maruti recently launched new initiatives to develop the market for automobile insurance. Two of their subsidiaries. As dealers claim payments on insurance claims directly from the alliance partners. Since May 2002. their new business initiatives generated net revenue of Rs. Maruti aggregates the finance products provided by these companies to offer uniform financing conditions to the customer at Maruti dealerships. While the functions of brand management. They believed the competitive rates offered for the finance products under this alliance and access to SBI’s extensive branch network will make their passenger cars affordable to a greater number of customers and expand the size of the market. range of products and extensive sales and service network to expand the size of the passenger car market in India. these companies have been acting as intermediaries offering products of these alliance partners under the brand name “Maruti Insurance”. 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. Alliance with the State Bank of India (SBI) In February 2003. SBI has agreed to provide automobile finance to Maruti’s customers. It is purchased upon the purchase of a vehicle and is subject to annual renewal. Additionally. 44 million. Leasing and Fleet Management Maruti leasing and fleet management services offered to corporate clients are marketed under the “Maruti N2N” brand. In addition. finance products of eight select finance companies. including those of two of their group companies. maintenance.. risk-underwriting and fleet management operations are managed by them. Maruti earns a sourcing fee from the finance company while the credit evaluation of the customer and the loan disbursement to the customer is done by the finance companies.000 branches and a vast customer base across India. Automobile Finance One of the key factors in the buying decision of a customer in the passenger car market in India is the availability of finance. the largest bank in India with over 9. Maruti had continually seek new ways to utilize vast car parc. Automobile finance has in the past been made available through direct selling agents of independent finance companies. and Citicorp Maruti Finance Ltd. Under the agreement with SBI. Insurance Intermediary Automobile insurance is mandatory in India. thus adding to their revenue from sale of spare parts and to revenues of dealers. a joint venture among Maruti. Housing Development Finance Company Ltd. which they refer as the “360 degree customer experience”. This increases the transparency of the financing transactions. and GE Capital Services India Ltd. SBI has agreed to work in close coordination with their dealers and with them in order to develop finance packages. The arrangement is to be branded “SBI MUL Finance”..
valet services and car replacement lies with them. Maruti receives from dealers a proportion of their revenue. MUL has reduced the number of vendors of components in India from 370 as of March 31. Maruti believes that their preowned car business is a significant marketing tool to retain customers and reduce their cost of ownership. they are well positioned to offer customers the opportunity to upgrade their cars. Maruti delegates this responsibility to their alliance partners. is responsible for collections and engages in lease product development. Only a small amount of raw material and components consumed are imported and a much larger portion is purchased from the sources within India. and acquire new customers. net of cost of refurbishment of the pre-owned car. 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. Maruti’s pre-owned cars business. Maruti earns fleet management rental fees from the client and a business development fee from the financier.1 and 1. This can be achieved by creating an organized market for the resale of the pre-owned cars.run this business: the financier. An additional 30 dealer-owned outlets are at various stages of launch. While the central intermediary to the transaction is a dealer. • delivery. In case of repair and replacements. Standard purchase orders are issued covering a period of six months for purchase of steel from foreign suppliers for Indian supplier the period extends up to one year. Prior to certification. “Maruti True Value” operated from 50 dealer-owned outlets spread over 34 cities. As on March 31. • quality. In 2001 MUL moved to the quotation system which gives them the flexibility to renegotiate the prices once an offer is submitted. being less expensive. 23 . the primary responsibility for maintenance and value-added services. where the value of the pre-owned car is assessed in a more transparent manner and the car is certified by Maruti. specifications were advertised and accept the lowest price offered by a supplier who could meet the specifications. The warranty given to the buyer of the pre-owned car is covered by an arrangement with insurance companies. MUL is increasingly trying to localize the purchases of steel coils with a view to reduce cost.3 times the size of the market for new cars and utility vehicles in fiscal 2002. Under this system. the business of selling pre-owned cars was handled predominantly by the unorganized sector. costs of defective components supplied are borne by the vendor. The car rental agency provides replacement cars if and when necessary. With their wide range of products. and • Cost control. The financier conducts initial credit assessment of the clients. provides funding. takes residual value risk. the insurer and the car rental agency. 2003. This led to a lack of reliability and transparency in transactions involving pre-owned cars. every car passes through a 120-point check. Raw Material Suppliers The raw materials used in the manufacturing process primarily comprise steel coils and paints. 2000 to about 100 as in 2005. The pre-owned car market in India was estimated to be between 1. . Earlier MUL used to follow the tender system for the purchase of steel. they play an advisory role in conducting technical evaluation. the dealer. estimating the refurbishment cost and providing certification and warranty to the buyer of the preowned car. The refurbishments of pre-owned cars which are under “Maruti True Value” improves the utilization rates of dealer workshops and other “Maruti True Value” outlets and also increase the sales of spares. In recent years. The insurer provides vehicle risk underwriting. Under standard agreements entered into by them. The dealer maintains the cars and provides other valueadded services such as valets and emergency assistance. Mul’s Supply Chain MUL’s inputs primarily comprise raw materials and purchased components. which includes verification of the seller’s credentials. In order to improve quality and generate economies of scale. address demand among two-wheeler vehicle owners aspiring to own a car and among existing car owners to upgrade their cars. Pre-owned cars business Pre-owned cars. launched in October 2001 is conducted under the brand name “Maruti True Value”. Until recently.
spares and accessories. Periodic vendor quality system audits are conduct in order to ensure that quality standards are sustained. across the different variants of the various models. This cluster approach was extended to helping vendors attain QS 9000 certification. Imported components Imported components are mainly purchase from Suzuki Sales network Dealers: MUL has the largest network of dealers amongst car manufacturers in India. and reducing their inventories. improving their yield from materials. including sales. dealers had employed more than 3. financial management and management systems is measured. to the vendors. Agreements with our dealers MUL dealers provide services to customers such as pre-delivery inspection of vehicles. and enable the vendors to more efficiently plan and dispatch their products. The sales of spares. This has enabled the vendors to eliminate packaging and supply components directly to the assembly line. reducing materials handling. in 1995 MUL adopted a cluster approach wherein vendors are grouped together. are trained in quality management and are assisted in obtaining ISO 9000 certification. These agreements are generally renewable for successive terms of three years. supply of spare parts and other services that promote sales of cars within the territory for which they are appointed. Reduction of Vendor Costs In some of the major vendors MUL has implemented the MPS. which maintains online information regarding order status and delivery instructions. the performance of a dealership in several areas of operations. which focuses on the elimination of wasteful activities in their manufacturing processes. This helps reduce their costs of production. whereby a vendor may become the sole supplier for a Suzuki product in several countries including India.Delivery by Vendors MUL has a delivery instruction system that provides details of the component requirements for every 15 days. Agreements with the dealers are usually of five years. by mutual agreement. This would generate economies of scale for the vendor that will also result in the reduction of the costs. Sales network is linked with the MUL through the secure extranet-based information network. To assist small and medium vendors in achieving ISO 9000 certification. Using this tool. Vendor Quality Control Quality management system such as ISO 9000/ QS 9000 forms the basis for producing a quality product. In addition the work is going on to integrate the vendors into the worldwide purchase system. Vendors located within a radius of 100 kilometers from the manufacturing facility supply the majority of the components.500 sales executives. In order to assist the dealers in enhancing their performance and capabilities. reducing the number of their components that are rejected. after sales service. The “Balanced Scorecard” serves as an effective incentive for dealers to enhance their performance. Enhancing dealer performance: The performance of the dealers is followed and improvements are suggested frequently. Vendors are helped in areas such as improving their productivity. and also reduces the costs of the components required. Vendors are linked to the MUL through the Internet-based information network. sales of cars. 24 . accessories and Automobile-related services such as insurance and finance serve as additional sources of revenue for the dealers. MUL has introduced a concept of “Balanced Scorecard”. or WWP. service. As of March 31. Dealers are required to maintain their outlets in accordance with the specifications and employ well-trained sales staff. These has helped in reducing both inventory levels and lead times required for the supply of various components and sub-assemblies. 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. 2003. Dealers who perform well on the “Balanced Scorecard” are reward with a cash payment at the end of the fiscal year.
For this. at that time. Many of the MASSs are at remote locations where MUL do not have dealers. (a division of Maruti Suzuki) produces half a million cars annually. so that if one link goes down. in terms of sales volumes. MUL has also implemented an enterprise management system. MUL has launched service stations under the brand “Maruti Service Masters. the company was facing rapid technological obsolescence. Outsourcing IT processes is the most cost-effective means of handling the costly turnover. two critical issues taken care of are : Reliability and throughput. As a benchmark for dealers with respect to service quality and infrastructure facilities. Lesson: Manufacturing companies often need a wide range of software and hardware skilled IT personnel to manage and support their infrastructure. the shop floor and the data center can still communicate through an alternative route. MUL chose a meshed network. Until 1993. To promote sales of spare parts and the availability of high quality. or MSMs. the systems at the shop floor connect to a central database and query it about the car model that needs to be manufactured. increased pressure on recruiting skilled manpower and reducing high turnover. at that time. software. Before a car is produced. called Unicenter TNG. 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.500 Maruti Authorized Service Stations. MUL also has service stations on highways in India under the brand “Express Service Stations”. has greatly improved customer satisfaction and achieves a higher return on investment (ROI) on its IT investments. They now have an infrastructure that can scale to support applications which can be added in future. If something goes down. it decided to go for fiber optic cabling. In that year.hardware. even though fiber was just introduced in India at that time. Maintaining people resources for so many different things -. networking. These are distributed through the dealer network and through the authorized sellers of the spare parts. reliable spare parts for its products. Outsourcing IT support and management to Compaq Computer Corporation (now known as HP) turned the troubled situation into a highly successful operation. service levels were poor and not cost-effective. To ensure reliability. uses world-class best practices and program management. was performing all IT support services in-house. In order to increase the penetration. covering more than 900 cities in India. But in the late 1990s. so that the assembly line can start running. Because of the turnover. It drew up a plan that detailed the new infrastructure and the applications to be run on the network. Maruti Udtog Ltd. This gives them the fiber's reliability and scalability. Maruti Udyog possesses 51 percent of market share in its domestic market.After-sales Service Network There are more than 400 Maruti dealer workshops and more than 1. of its products in these remote areas. or MGP. had a strong presence in India with a wealth of IT skilled employees Today. Compaq. In addition. At the very outset. 24-hour mobile service is also offered under the brand “Maruti On-road Service”. or MASSs. Maruti Udyog. an automatic complaint is logged into MUL's internal call center. The entire infrastructure is geared towards ensuring that the shop floor can run in real time. and systems software – was the greatest problem for the MUL. spiraling IT and support costs. non-standard operational IT service levels and an unstructured approach to problem management." The software monitors all links. MUL's IS environment was predominantly mainframe centric. 25 . insurance and financing Information Technology The largest automobile manufacturer in India. the company decided to move to an open environment. The response from the database takes less than a few seconds. spares are sold under the brand name “Maruti Genuine Parts”.
All these applications run on the Internet and connect to the databases in Gurgaon. training and sustenance of the dealer management system. need arises for more memory and faster processors. networking. product features and price lists. will also serve as a knowledge repository from where dealerships can access information on customer schemes. 26 . Wipro. In a normal PC environment. backups taken are randomly checked to ensure the data is readable off the tapes. users tend to install many unauthorized applications via CD-ROMs. The total data today hovers around the 2-Terabyte mark. As a result demands for replacements and upgrades were there. It will help raise customer service levels and enhance the quality of management at dealerships. They can also track the status of their order. they will benefit from the ‘single face of Maruti’ irrespective of the dealership. The MetaFrame environment also enables: An executive to sit on any PC and access her/his personal desktop with all her/his necessary applications. not all applications in MUL are supported on the MetaFrame platform like HR applications for salary. insurance and other intangibles to customers. Dealer Management System (DMS) Very recently Maruti Udyog Limited has joined hands with Wipro Infotech. as the core IT partner with Maruti. would be responsible for implementation. The system will assist dealerships in customer retention and help build lasting relationships. All these applications are ported onto the NFuse server . MUL has a regular tape library backup at this site. There are two DR sites. The first one is 1. However. Maruti faced a similar problem. the system is being expanded to offer finance. also use a Web-based application to log in their requirements for new cars. the Asia Pacific and Middle East information technology arm of Wipro Limited. spares and accessories. The system aims at issuing alerts to dealerships whenever they are falling short of performance norms in various areas like level of customer complaints. which is the first of its kind information network system implementation in India. who interact with the company daily.The IT applications MUL runs are mostly enterprise wide. Plus. floppies and even Internet downloads. managed by software from Veritas. That's when MUL started evaluating the need for thin client technology for desktop applications.5 km from the central site and is connected through a direct fiber link. The system will enable the 450 dealerships of Maruti across India to access updated information from the car manufacturer and a real time view of their operational processes for better efficiencies. The storage infrastructure is based partly on SAN (Storage Area Network) and partly on DAS (Direct Attached Storage). The data story MUL sure takes its business data seriously. As far as the customers are concerned. MUL distributors. a company release said. reimbursements and the like. which are hosted in a client-server environment. The company has a very good DR (Disaster Recovery) strategy. Gradually. apart from dealer integration with a central database. Another factor that influenced the deployment of Citrix's technology was the need to control users' access to desktops. handling and sales. Some of the critical or major applications include materials for making and dispatching cars and spares to distributors. for a nationwide Dealer Management System (DMS). Most PCs in Maruti were bought during the grand systems overhaul in 1993. In fact. All these factors led to the MetaFrame deployment. Maruti Computes MUL's desktop applications run on the Citrix MetaFrame platform A need to replace old PCs regularly was the key reason behind choosing MetaFrame. The system. Even the developers' team accesses its applications through NFuse.
like basic frameworks and goals and the IT system is no exception. the Customer Relationship Management. For example. Internet Approach: For MUL the Internet link is highly critical. they try to penetrate the network. This involves two key steps.For mission-critical applications. etc in place. First. checking for adherence to the security policy or instances of illegal software installed in violation of the policy. 27 . to provide what MUL refer to as the “360 degree customer experience. the outside agency runs surprise checks on users' desktops. Armed with a few IP addresses of the servers lying inside. the IT divisions in MUL and the Japanese auto major have been brought in greater alignment with each other. The company has already put major security components. if a new server were to be installed. So in case of a disaster. and an RF (Radio Frequency) link from VSNL. Marketing Maruti’s marketing objective is to continually offer the customer new products and services that: • reduce the customer’s cost of ownership of our cars. The entire business depends on transactions made with distributors and suppliers. Hence continuous improvements are going on taking the best of the facilities as the benchmark. it would go through specified security checks and audits. The rationale behind the price cuts is the focus on offering new upgraded vehicles at a low price. which consists of a copper link (leased line) from BSNL. One key aspect of the security policy is the provision for a security audit done by a third party. Then the mid sized Versa's price was slashed. the data can be recovered up to the last log applied. If MUL losse connectivity. The second step constitutes attack and penetration tests. This way users don't suffer a long downtime. Customer Relationship Management MUL has a comprehensive database of customers. The key to security MUL has a comprehensive corporate IT security policy in place. which provides centralized access to dealers and MASSs and enables more efficient and integrated management of sales and service network. MUL has another DR site in a separate location where there are full-fledged hot servers in place and the data is kept synchronized using logs. This exercise helps them in detecting the loopholes. It began the year by slashing the price of Esteem's diesel version followed by a by the reduction on the premium segment Baleno. virus scanners.” MUL has been aggressively cutting prices of its models since the beginning of the year. Alto's price tag was then pruned putting its base variant at par with the AC version of M800. MUL has always benchmarked itself against Suzuki across various corporate parameters. and • Anticipate and address the customer’s needs and preferences in all aspects and stages of car ownership. the entire business would grind to a halt because of the absence of a manual ordering system. This is why MUL has invested in a fully redundant connectivity solution. like shop floor and dispatch applications. Engineers from the external agency sit outsides the MUL network. The future Since the time Suzuki took a majority stake in the company. including firewalls.
training and development. performance-benchmarking to certain parameters such as noise. • Building a strong and motivated work force by emphasizing safety. which was augmented to 130. 2002 as a wholly owned subsidiary of Maruti with an authorized capital of Rs. 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. finance and insurance. The company has adopted a ‘focused model cost reduction’ technique. continuous training of dealer staff in order to ensure quality of operation to ultimately achieve the business objectives of TVSL. All this has resulted in significant reduction in the investment required for the modifications. MUL also offers an extended paid-warranty program marketed under the brand. MUL regularly upgrade its models and also launch variants by adding features developed through research and development. development of alternate fuel (CNG and LPG) vehicles. education and continuous improvement of the manufacturing capabilities and those of the vendors. The dealers subsequently claim the warranty cost from MUL. True Value Solutions Limited (TVSL) TVSL was incorporated on January 14. ride handling and braking and development of power-steering for certain models. It obtained the certificate to commence business on May 1. or bear the cost ourselves. Maruti has been continuously engaging in Value Analysis/Value Engineering (VA/VE) activities across its operations. The first plant was set up in fiscal 1984 with an initial installed capacity to produce 20. “Forever Yours” for the third and fourth year after purchase. 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 also intends to promote the business in the areas of pre-owned cars. in accordance with practices and procedures prescribed by MUL. cost reduction measures such as VA/VE. 5 million.Warranty and Extended Warranty Program MUL offer a two-year warranty on all the vehicles at the time of sale. under the provisions of the warranty in force at that time. Manufacturing The core focus areas of Maruti’s manufacturing division are: • Benchmarking against global standards so as to efficiently manufacture quality products. As part of Suzuki’s plans to make Maruti its research and development center for cars in Asia (outside Japan).000 by fiscal 1991. Installed capacity was further increased with the second plant becoming operational in fiscal 28 . An effort is made during the period of the extended warranty to encourage the customer to exchange his existing Maruti car for a new Maruti car. The extended warranty program is intended to maintain the dealer’s contact with the customer and increase the revenue generated from sale of spares. lease and fleet management. in the case of defective components. or upgrade to a new Maruti car. The dealers are required to address any claim made by a customer. Some areas in which MUL carry out research and development are localization and development of components. 2002 in NCT of Delhi and Haryana. These services include compliance with predefined business processes at the dealership. it is expected to have full model change capability by fiscal 2007.MUL analyze warranty claims from dealers and either claim the cost from the vendors. accessories and automobile-related services. TVSL provides value-added services to owners and users of motor vehicles on matters relating to manpower services with regard to recruitment.000 vehicles per annum. in the case of manufacturing defects.
000 units a year. which is expected to begin its production by the end of 2006. Suzuki Motors and Maruti decided to invest 32. increasing utilization of production lines. installed capacity increased to 350. at the production planning stage. This plant. 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. In addition to MPS activities. a diesel engine manufacturing unit and for increasing automation and efficiencies in Maruti's current facilities. PDCA Constitutes: • Planning by setting a target and time-line. In fiscal 1996. within the same day. This is possible due to our information technology-enabled vehicle build sequence system and vehicle tracking system. 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. which will be set up at a cost of 17. Maruti’s Manufacturing Paradigm Maruti has adopted a target control and PDCA approach as the underlying theme of all its processes. which would make high-end cars.000 vehicles per year. The proposed diesel engine unit would be set up under Suzuki Metals India. under which a car assembly unit is being set up. 29 . This unit would be set up under Suzuki Metals India. and focuses on elimination of wasteful activities taking place during manufacturing processes.000. As shown in the table below. increased by approximately 79% from fiscal 1995 to fiscal 2002. It will also make up to 140. Productivity Improving productivity is an ongoing effort at Maruti. which is would be renamed as Suzuki Engineering India. with capacity increases in each plant. will begin production by the end of 2006. measured as the ratio of production volume in a fiscal year to the number of its permanent employees at the end of the fiscal year. Maruti’s facility has advanced engineering capability and is upgraded on an ongoing basis to improve productivity and quality.000 vehicles per year. They also have our own reverse osmosis water treatment plant and effluent and sewage treatment plant. and would have a capacity to produce 250. is being set up in Manesar. The new unit. respectively. which has multi-fuel capability.1995 to 200. The plant will supply diesel engines to Maruti as well as export engines to Suzuki subsidiaries in Europe and Asia.5 billion rupees. Suzuki would undertake a feasibility study to set up a gearbox production unit in India. an existing 49:51 joint venture between Maruti and Suzuki.000 petrol engines. which is the highest among passenger car manufacturers in India and among the passenger car manufacturing facilities of Suzuki’s subsidiaries outside Japan. through the Maruti production system. Maruti’s employee productivity. 24 September 2004. Maruti Udyog would hold a 70 per cent stake in the new joint venture. Maruti have 17 manufacturing shops and are capable of producing more than 50 variants of the nine basic models manufactured. This plant will receive an investment of 15. Gurgaon. which is derived from the Suzuki production system. in-house automation. with different specifications.2 billion rupees. or MPS. With the third plant becoming operational in March 1999. • Hecking through gap analysis to check whether the operation is really giving the desired results • Acting to freeze if effective or correct. The engine plant will have a capacity of 300. Under the vehicle build sequence system. dividing into action plan with value to each factor/element. Our vehicle tracking system monitors and records the implementation of the planning during production.000 diesel engines and 20.7 billion rupees over the next five years to set up a new car assembly unit.000 transmission assemblies. • Doing the standardized operation as decided. installed capacity increased to 250. Utilities Maruti do not have to rely on outside sources of power as they have a 60-megawatt gas turbine captive power plant. Suzuki would hold the balance.
30 . This was achieved by using energysaving lights and natural light. or Pokayoke in Japanese. Quality They had produce high quality products. declined by approximately 85% between fiscal 2002 and fiscal 2004. Maruti had recently adopted Suzuki’s global customer audit index. • Reduction in rejection: Their in-process rejection cost per vehicle. • Quality gates at various stages in order to raise alarms for correction and immediate action on defects. • Fool-proofing. In addition. In addition. by approximately 70%. cross-linked with overall targets. some of which Maruti had been exporting to various countries including the Netherlands. they had reduced the consumption of electricity measured as the ratio of kilowatt hours of power consumed to the number of vehicles produced. computed as the ratio of (1) the aggregate cost of components incurred by us to service warranty claims arising from operational defects in our manufacturing lines. thus reducing wastage. A new feather was added recently in Maruti’s cap in the field of quality when the Quality Management System of its Press Shop & associated functions got certification for conformance to the requirements of TS16949:2002 standard. computed as the ratio of (1) the cost of components rejected due to defects arising during our production process. the quality of a vehicle dispatched from their facility is measured through a quality index audit on a daily basis. and channel resources towards customer complaints for rapid response. which signifies the percentage of vehicles that pass through the inspection stages as defect-free. This is achieved through the recycling of waste water in their water treatment plant and effluent and sewage treatment plant. reducing the consumption of water. or DFC OK percentage. which comprises checks conducted in order to prevent defects arising from human error during the manufacturing process. improved from approximately 77% in March 2002 to approximately 90% in March2004.Conservation of energy Maurti had followed the three principles of “Reduce. the United Kingdom and Switzerland. declined by approximately 65% from fiscal 2002 to fiscal 2004. In the same period. by approximately 35%. they had made the following improvements in terms of producing defect-free products: • DFC OK: Their Direct Final Check OK. measured as the ratio of the volume of water consumed to the number of vehicles manufactured. Suzuki Quality Management System Based on a method adopted by Suzuki at its manufacturing facilities. Germany. Between fiscal 1997 and fiscal 2004. to (2) the numbers of vehicles sold in the fiscal year. and also the efficient usage of other electrical appliances. in order to provide a more customer-oriented focus to the entire organization. A real-time feedback system. The quality index is a relative measure of quality based on evaluation of vehicles selected at random on a daily basis. • Full-time task forces for improvement in initial quality study problems and departmental cross-functional teams to work on defined problems with challenging targets. Maruti was certified with ISO: 9001:2000 in 2001 and aim to achieve the TS-16949 certification. Italy. Quality Improvement Initiatives For quality control Maruti had recently introduced: • Tracking surveys and direct customer contact in order to better understand customer satisfaction levels and customers’ problems. • In house warranty: Their in-house warranty costs per vehicle. Reuse and Recycle” for conserving energy. to (2) the number of vehicles sold.
there has been a suggestion scheme in which they promote participation of all employees at all levels. Based on the belief that individuals contribute to improvement in growth. the assembled parts undergo final welding. roofs and bonnet.• The “Pica Pica” system. In the press shop.000. In this shop. Weld Shop: There are three welding shops with 122 six-axis robots and 25 in-house manufactured two-to-four axis robots. various press metal components manufactured in the previous stage are spot-welded together to form the body shell. The Kaizen activities had resulted in the improvement of the in-house capabilities. Kaizen Maruti had adopted the Japanese management concept of Kaizen. Paint Shop: There are three paint shops. An anti-rust coat is applied at this stage. the body undergoes various pre-treatment and electro deposition painting processes to provide a high corrosion resistance to the body. or continuous improvement. Various parts such as the floor panel. as compared to fiscal 2002. Subsequently. The welded body is sent to the paint shop through a conveyor. For example. they had manufactured 25 multi-axis robots and 16 multi-spot welders. side panel. Some of the other improvements as a result of the Kaizen process have been increased automation through automated material transport system. an activity referred as quality circle activity. when suggestion received were more than 80. The average number of suggestions made per employee has improved by approximately 35% in fiscal 2004. Group discussions among employees in different departments are conducted on a monthly basis in order to discuss and resolve problems relating to their areas of operation. steel coils are cut to the required size and panels are prepared by pressing them between various die sets such as doors. The car body is given an intermediate or primer coat before applying the storing 31 . within one of which the final outer body is fully painted by robots. Manufacturing Process The manufacturing process at Maruti facility is depicted below: The production of a car at Maruti facility occurs in the following stages: Press Shop: Press shop has five transfer presses and two blanking lines. which aligns the sequence of components and vehicles in order to prevent incorrect fitting of components. doors and bonnet are subassembled in this shop. In the paint shop.
since Maruti’s inception: • • • • • • Provides with technical know-how. Help them to develop and manage the supply chain for their products. the car is transferred to an overhead conveyor.topcoat paint. the steering wheel and the battery are fitted. wherein components such as the engine. windshield glass and interior trim components are fitted. The painted bodies proceed for final assembly in three stages. sale and after-sales service of various products and parts. The intermediate and the final coat are applied by using automatic electrostatic spray-painting machines (micro bells) and robots. Maruti will not otherwise sell. Deputed technical personnel to their facility. 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 32 . The completely assembled vehicle finally rolls out of the assembly lines to the final inspection stages. Supplied components to Maruti’s passenger cars. The first stage is the trim line wherein various components such as roof head lining. followed by a baking process. The vehicle is then lowered to the final line on its own wheels and here components and parts such as seats. or export products covered by agreements with Suzuki to. in various plants. 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. assistance and information for the manufacture. any territory except those permitted by Suzuki. Maruti in return had agreed with Suzuki that amongst other things: • • • Maruti will not manufacture in. gearbox and front and rear axles are assembled on the underbody. Training of personnel. Assembly Shop: Maruti has highly flexible assembly lines. 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. which is Japanese for continuous improvement. Thereafter. Help them to develop manufacturing processes and integrate certain Japanese management practices such as kaizen. which can simultaneously handle a large number of variants as well as adapt to sequence changes. distribute or promote the sale of any product that competes with products covered by the license agreements with Suzuki. License agreements with Suzuki Suzuki has several license agreements with Maruti under which it has. the chassis line.
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