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Entry segment remains our core biz: Kenichi Ayukawa

Kenichi Ayukawa

  Maruti Suzuki, country’s largest carmaker, is getting its third plant ready in Gujarat in the next five months. The development will address the long wait on some models and ease capacity constraints. Its managing director, Kenichi Ayukawa, speaks to Ajay Modi on this, reducing risks in component sourcing and the continued thrust on the entry segment  market. Edited excerpts:

The festive season is round the corner. How is the company preparing to cater to the strong pick-up in demand?

We need to deliver as many vehicles as possible. We have a production schedule that takes into account the seasonal increase in the pre-Diwali phase. Our production is aligned to meet the increase.

What is status of your third plant in Gujarat?

The factory construction is nearly complete. We are starting to install the machines. By the end of the calendar year, we will start trial production. Actual commercial production should commence in January-February. It will have an initial capacity of 250,000 units but reaching that scale will take six months to a year after production commencement.

How will cost of products from the Gujarat plant compare with the existing two units in Haryana? What will you first roll out from this unit?

A new factory will have a new depreciation system. Also, some parts we will need to move from the north to Gujarat. While that is a pricey exercise, we have to absorb these costs. The first product will be the Baleno, though Manesar will also continue to produce the hatchback. We have a huge backlog of orders for the Baleno that we need to absolutely deliver. We are yet to decide on the second product.

The company had a production setback recently, when supply of a key component was disrupted due to fire at the supplier’s plant. Does this call for a review to avoid concentration of supplies from one unit?

We recognise the perils of too much dependence on one player at one place. Vendors should split production across units to avoid unforseen challenges. We will keep this in mind when selecting suppliers for future models.

Is the life-cycle of cars getting shorter?

Every three years, minor tweaks are done in our product line; a full model change every six years. We may have to work with shorter timeframes in the future.

Also Read: What's Driving Maruti Suzuki Stock?
  How is the goods and services tax (GST) going to help your business?

Details of the GST are still not known. The rate has not been fixed. That is a source of anxiety. Some say cars will get cheaper. It is a concern, as buyers would decide to wait for clarity. But, in the long run, the GST will help the (automobile) industry.

Car prices will go up in the next two to three years, once the safety and emission norms are implemented across product ranges.

How do you plan to minimise the burden on buyers?  

Increasing volumes will help us to bring down costs. Increasing the local sourcing of content is another way. Still, some materials will have to be imported. We tried to invite some suppliers to produce in India. To persuade them, we need volumes.

In the past couple of years, Maruti has shown strength in products outside the entry segment. How do you see the situation in that segment, where competition is getting bigger?

We have started Nexa (sales channel for our premium cars). We will have to put more models there. In the existing channels too, more models will come. The entry segment is our core business. It is these customers who will later drive the higher segments. The focus remains on the entry car market. We keep discussing how to compete with some of the new products in the segment.

What are the concerns, going forward?

We will focus on increasing sales and profit. There is a focus on saving costs. Our business is, at times, impacted by foreign exchange and this is beyond our control. It is our request to offer stability to the industry. Once a regulation is brought, it should not change. We make investments based on regulations.  

What are your plans for new technologies such as the hybrid?

We are doing some hybridisation. It takes time to grow these segments. We need to develop engineering capabilities in this segment. We have hybrid features in the Ciaz and Ertiga and we will expand the range.