Maruti mulls to enhance localization to 90%

The sluggish growth continues in the Indian car market due to the two leading factors, the high lending rates and volatile fuel prices. While all the major automobile manufacturers are offering high discounts on their respective car models in an attempt to increase their sales, Maruti Suzuki India is concentrating hard on increased localization to maximize its profits in the dire situations. Maruti India is said to increase the localization of its products by 15%, taking up to 90%.

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The leading auto manufacturer in India, Maruti Suzuki India intends to increase its in-house component production by entering into an understanding with its vendors for increasing the localization from 75%-90%. This is all hoped to happen in a specified time period of 2 years, failing in which, will lead to a penalty that has to be borne by the vendor. Mr R.C. Bhargava of Maruti Suzuki India, had elaborated that, with the cost reduction plan implemented by the MSI, the company intends to pass on the benefits thus occurred, to the vendors by providing them with incentives. This will also help the vendors to work more aggressively towards localization.

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The Maruti Suzuki India’s R& D facility at Rohtak, Haryana is also believed to help the vendors in meeting their targets, which is likely to give a 5% cost saving to Maruti India. However, what remains to be seen is whether MSI is going to stick to its word and pass on the benefits to the vendors or, all it is trying is to implement a strategy to make more profits. With the increased localization, the MSI car buyers are definitely going to be benefited in a long run, due to now-lower cost of components. However, the increased localization plan seems to be an all-win situation for the buyers, vendors as well as the MSI and the stake holders.

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