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Government wants Maruti to be indigenised completely - Views on News from Equitymaster
 
 
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  • Dec 25, 1999

    Government wants Maruti to be indigenised completely

    The government wants Maruti to be indigenised totally, and it has conveyed the same to Suzuki Motor Corp.

    MUL, a joint venture between the Indian government and Suzuki Motors of Japan, has a presence in the small car segment (800, Zen), mid-sized segment (Esteem, 1000), and the utility vehicle segment (Gypsy)

    Earlier the gear-box used to be supplied by Suzuki Japan. This constitutes 5% of import content in various Maruti models. But now the government is demanding that even this be manufactured locally. The government's demand is even more strange given the fact that it had decided earlier that it did not make much business sense to infuse funds into indigenising the gear box technology, more so at a time when the company's needs funds for new models.

    According to a news report, Manohar Joshi (heavy industries minister) quoted the Suzuki chief as saying that it plans to introduce a new model every year. The government proposes to support Suzuki in this endeavour.

    There seems to be some confusion between the two partners regarding the company's strategy. The gear box indigenisation for one is not a very clear issue. The government wishes to manufacture it locally, while having admitted in the past that it has scarce funds, which would be better employed in introducing new models. One can't shake the feeling that the government wants to gradually reduce dependence on Suzuki.

    Moreover, the government has time and again reiterated in the past that it will not infuse fresh funds in Maruti, nor will it divest its stake. Yet Suzuki has categorically stated that it plans to introduce a new model every year. The moot point is where will the funds for the new model(s) come from?! As competition gets more intense, this is the kind of confusion the company can do without.

     

     

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