Maruti not planning an ultra-low-cost car

Maruti Suzuki India Ltd, India's top car maker, sees a greater focus on fuel-efficient small cars, hybrids, electric and multi-fuel cars, but has no plans to launch an ultra-cheap small car.

Chairman R.C. Bhargava told a shareholders' meeting on Tuesday that Japan's Suzuki Motor Corp, which owns 54.2 percent of Maruti, wanted to shift to India the bulk of its research and development on cars with engine capacity of 1200 cc or lower.

"Now 60-70 per cent of it is being developed in Japan. Suzuki wants to make 90 per cent in India," he said without elaborating.

Maruti Suzuki has about half of the Indian car market, with models such as the best-selling Alto and Swift hatchbacks, and has been shifting consumers to premium models such as the DZire sedan.

But the high cost of inputs such as steel have hit margins, while surging inflation, rising interest rates and higher fuel prices have hurt demand in Asia's third-largest economy.

"Oil prices had reached from $60-70 per barrel to $140 a barrel. That $60-70 level will never come back," Bhargava said.

Competition is set to increase with Tata Motors scheduled to soon launch the Nano, billed as the world's cheapest car with a price tag of about $2,500, and a clutch of others including Honda eyeing the small car market.

General Motors said last week it planned to launch a global small car, which would have design inputs from India, in the second half of 2009.

"Over the last few years, many cars have come into the market and you will agree that Maruti has not failed to compete," Bhargava said.

But in its annual report, Maruti said it would stay out of the ultra-low-cost car segment as it expected rising incomes and changing lifestyles to increase demand for well-designed and feature-rich compacts in India.

Maruti sold 711,818 cars in India in the 2007/08 fiscal year that ended in March, and has targets of 1 million local sales and 200,000 exported vehicles by 2010/11.


Courtesy:timesofindia.com
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