1. ANALYSIS OF MARUTI
December 27, 2006
Arunesh Chand Mankotia

2. AUTOMOBILE INDUSTRY IN INDIA
• Automobile Industry in India is still in its infancy
but growing rapidly.
• The opportunities in the automobile industry in
India are attracting big names with the big purse
and they are investing vigorously in
infrastructure, design and development, and
marketing

3. • India is the 2nd largest two wheeler
manufacturer in the world
• Second largest tractor manufacturer in the world
• 5th largest commercial manufacturer in the world
• 3rd largest car market in Asia, surpassing China
in the process

4. Major players have started sourcing components from
India, such as
• Fiat Plans To Source US $200 mn. Worth Of Components
From India Per Annum
• Mercedes Benz (Daimler Chrysler) Has Set Up 7 Component
JVs In India For Global Sourcing Of Parts
• Cummins USA Is Already Sourcing Engine Parts From India
For Cummins Global Operations
• Multi National such as DELPHI and VISTEON have started
exporting components made in India to their various other
plants around the world- Investing further to make India as a
manufacturing base.

5. • Key Player 402
• Investment US $ 2.3 billion
• Output US $ 4 billion
• Exports US $ 417 million
• Employment 250,000 persons

6. Industry Segments
The Indian automobile segment can be
divided into several segments viz.
Two-wheelers (motorcycles, geared and
ungeared scooters and mopeds),
Three wheelers, commercial vehicles (light,
medium and heavy),
Passenger cars, utility vehicles (UVs) and
SUVs

8. Industry Scenario
Around 80% of all new cars are financed. The
increased availability of finance at low rates
and strong GDP growth translated in a healthy
growth for the industry.

9. Major Manufacturers of Automobiles in India
• Maruti Udyog Ltd.
• Hyundai motors India
• TATA motors
• Honda
• Toyota
• General Motors India
• Ford India Ltd.
• Fiat

10. Player wise Market Shares
16% MUL
M&M
45%
17% TATA
HYUNDAI
15% 7% OTHERS

11. Company Background
 Maruti Udyog Limited was established in 1981 to meet the growing
demand of a personal mode of transport caused by the lack of an
efficient public transport system.
 Suzuki grabbed the opportunity in 1983 with both hands and formed
a joint venture with the Indian Government, which was called Maruti
Udyog Ltd (MUL).
 The first cars rolled out for sale on 14th December 1983
• The company reached a total production of one million vehicles in
March 1994,
• Becoming the first Indian Company to cross this milestone. It
crossed the two million mark in 1997.

12. Board Member of Maruti
• Mr Shinzo Nakanishi, Chairman
• Mr Jagdish Khattar, Managing Director
• Mr Hirofumi Nagao, Joint Managing Director
• Mr Shinichi Takeuchi, Joint Managing Director
• Mr Kinji Saito, Director (Marketing and Sales)
• Mr Osamu Suzuki, Director
• Mr R C Bhargava, Director
• Mr S V Bhave, Director
• Mr Kumar Mangalam Birla, Director
• Mr Amal Ganguli, Director
• Ms Pallavi Shroff, Director
• Mr Manvinder Singh Banga, Director

13. The Objectives of MUL
– Modernization of the Indian Automobile
Industry.
– Production of fuel-efficient vehicles to
conserve scarce resources.
– Production of large number of motor
vehicles which was necessary for
economic growth.

14. VISION
“ The leader in the Indian Automobile
Industry Creating customer delight and
shareholder’s wealth; A pride of India”

15. Present Performance 18%
Rs m) 4QFY04 4QFY05 Change FY04 FY05 Change
Volumes sold (units) 144,103 146760 1.8% 472,122 536,301 13.6%
Net sales 28,873 30452 5.5% 93,456 109,624 17.3%
Expenditure 25,961 26297 1.3% 84,428 95,561 13.2%
Operating profit (EBDITA) 2,911 4,155 42.7% 9,027 14,063 55.8%
Operating profit margin (%) 10.1% 13.6% 9.7% 12.8%
Other income 998.4 969.2 -2.9% 4,055 3,915 -3.5%
Interest 115.8 99.5 -14.1% 434 360 -17.0%
Depreciation 1,516 1122.2 -26.0% 4,949 4,568 -7.7%
Profit before tax 2,278 3,902 71.3% 7,699 13,049 69.5%
Tax 706 1307.9 85.3% 2,277 4,513 98.2%
Profit after tax/(loss) 1,572 2,595 65.0% 5,422 8,536 57.4%
Net profit margin (%) 5.4% 8.5% 5.8% 7.8%
No. of shares (m) 288.9 288.9 288.9 288.9 288.9
Diluted earnings per share 21.8 35.9 18.8 29.5
(Rs)*
P/E (x) 14.8

16. Cars - Performance Snapshot
Segment Models FY04 FY05 % change
A1 M800 167,561 116,262 -30.6%
C Omni, Versa 59,526 65,019 9.2%
A2 Alto, Wagon-R, 176,132 271,280 54.0%
Zen
A3 Baleno, Esteem 14,173 29,637 109.1%
Total passenger 417,392 482,198 15.5%
cars
MUV Gypsy,Vitara 3,555 5,204 46.4%
Domestic 420,947 487,402 15.8%
Export 51,175 48,899 -4.4%
Total 472,122 536,301 13.6%

17. The company’s operating margins, as is evident from the graph, has
been consistently improving since 3QFY04.
This improvement is on a low base and further increase is likely to be
limited. This is because of two reasons. One, new model launches will
require additional promotional expenditures and secondly, given the
intensity of competition, there is likely to be pricing pressure on existing
models.

18. Contd……
• Maruti postpones diesel Esteem launch
– Decided to apply brakes on the launch of diesel
version of its mid-size offering Esteem as well as
Gypsy.
• Increase capital expenditure in the next 2 years in
order to increase the capacity and more importantly, to
enter the diesel-engine market

19. Product Segmentation
Model Length Classification Price Classification
• M 800 A1 Mini A
• Alto A2 Compact B
• Baleno A3 Mid-size C
• Esteem A3 Mid-size C
• Wagon R A2 Compact B
• Zen A2 Compact B
• Versa UV C
• Omni UV A
• Swift B+

21. Value Chain Analysis
Raw materials Processing Finished Goods
Raw Materials cost = 84,406 Total sales=1,16,894
Value addition = 32,488

22. PEST Analysis
• Political
- Government Initiative.
• Economic
– Rising Oil prices.
– Export growth of 59%.
– More investment growth.
– 6.9% GDP.

23. • Social Cultural
• Awareness high.
• Disposable income is high.
• Attitudes
• Technological
– Internet.
– Distribution
– Cheap products

24. PORTER’S FIVE MODEL
Threat of
new entrants
Bargaining power Bargaining
of suppliers power of buyers
Threat of
Substitute products
and services

25. STRENGTHS
• Leader in small cars
• Market Share
• Growth exports
• superior technology, styling
• One stop shop
• True value’, ‘Maruti finance’‘Maruti
Insurance’
• After sales service

26. WEAKNESSES
• Product diversification
• No diesel car
• Perception about quality
• Weak image of made in India

27. OPPORTUNITIES
• High scope of domestic consumption
• Huge export market
• Auto components
• Easy availability of finance at low interest
rates

28. THREATS
• Rising oil prices
• Growing d or premium car segment
• Mid-size cars crossed the one-lakh mark at
1.38 lakh units
• Low manufacturing cost in china and Thailand

29. Present Strategies being Followed
• Price-cut strategy
• Using JIT in order to reduce Inventory
• Company has also implemented a vehicle-tracking system
• Maruti Udyog Ltd is all set to deal in `pre-owned' cars from other
manufacturers at its True Value outlets
• Maruti earmarks nearly 0.3 per cent of its turnover as IT spend
• Sending engineers from India to Japan for a long-term training
• Transfer of technology
• Tied up with Appu Ghar
• MUL has also organised a simple contest for visitors.

30. Policy
• Nothing goes waste
• Expanding the car market
• Operational efficiency and productivity

31. New Strategies
• More on R&D
• Introduce at least one new passenger car
model every year
• Also plans to displace the good old
Ambassador from the taxis and government
vehicles segment.
– We are also offering discounts to taxi owners
to buy our cars.

32. RECOMMENDATIONS
• Continuous value addition to professional skill
• Training customized to meet organizational objectives
• Competency mapping to identify individual training
needs
• Outsource HR for long term strategic plan
• Focus on Product Diversification
• Should launch Diesel cars

33. Since the opening up of the Indian
automobile market in the early 1990s, a lot
has changed. Customers can now
choose from a wide range of models.
Maruti's overwhelming dominance of the
market has gone. Yet, one thing remains
unchanged - the price sensitiveness of
Indian customers.

35. • http://www.blonnet.com/ew/2002/01/30/stories/2002013000
• http://www.thehindubusinessline.com/bline/2003/08/19/19h
• http://www.rediff.com/business/2000/may/22maruti.htm
• http://www.rediff.com/business/2000/apr/24maruti.htm
• http://www.rediff.com/business/2000/feb/09maruti.htm