PROCESS OF AUTO FINANCING BY BANKING SECTOR

A study in MARUTI SUZUKI INDIA LTD

A report submitted to IIMT, Greater Noida as a part fulfillment of full time Post graduate Diploma in management (FM)

(2007-2009)

Submitted to Submitted by Director (Academics) ShwetaDwivediIIMT, Greater Noida ENR NO. 1016 PGDM(13th Batch)

ISHAN INSTITUTE OF MANAGEMENT &TECHNOLOGY1A, Knowledge Park-1,Greater Noida ,Dt.G.B.Nagar (U.P.)

Website : www.ishanfamily.com, Email :ishan_corporate@yahoo.com

1

CERTIFICATE

2

ACKNOLEDGEMENT

It is the great pleasure to have this opportunity for the preparation of this project. We have highly obliged by Ishan Institute of management & Technology for giving the opportunity of this dissertation.

We take an opportunity to acknowledge our indebted to Dr. D. K. Garg (Chairman, IIMT), and all the staff of the PGDM department for making available all facilities in fulfilling the requirement for the reasonable work.

I wish to acknowledge our thanks to Mr. S.K. THOMSON (G.M.) ,Mr. SANJAY PATHAK (H R Manager) & thanks to our guide Mr. DINESH PUROHIT (Finance Consultant) for their valuable Co-operation and efforts for the preparation of this project.

Last but not least, We also very much thankful to our parents, brother and sisters for their continuous encouragement and moral support during this project and other people who helped us in preparing this project knowingly and unknowingly.

Date: - Shweta Dwivedi

Place: - MARUTI SUZUKI INDIA LTD Enr. No. FMR-1016 [GORAKHPUR] PGDM (13th Batch)

3

DECLARATION

The summer project on PROCESS OF AUTO FINANCE BY BANKING

SECTOR is the original work done by me.

This is the property of the institute & the use of this report without prior

permission of the institute will be considered illegal and actionable.

Date: - Signature of student

Shweta DwivediEnr. No. FMR-1016

4

TABLE OF CONTENTS

Chapter - 1 Company Profile (i) Name of the Company (ii) Head office (with address) (iii) Branch office (with address) (iv) Historical Background (v) Vision and Mission StatementChapter - 2 Trade Policies (i) Main Business (ii)Ancillary BusinessChapter - 3 Competitors Chapter - 4 Promoters and BackgroundChapter - 5 Vendors / Suppliers AnalysisChapter - 6 Demand Supply Analysis Chapter - 7 Research and Development ActivitiesChapter - 8 Key Staff (i) Managerial Hierarchy (ii)Duties and Responsibilities of Key StaffChapter - 9 H R PoliciesChapter - 10 Marketing PoliciesChapter - 11 Attractive Features of the CompanyChapter - 12 Government Policies Related to the BusinessChapter - 13 Job Profile / Assignment ProfileChapter - 14 Findings and LimitationsChapter - 15 Suggestions / RecommendationChapter - 16 Learning while EarningChapter - 17 Our AchievementsChapter - 18 Case Study Chapter - 19 ConclusionChapter - 20 BibliographyChapter - 21 Words of Thanks

5

EXECUTIVE

SUMMARY

6

EXECUTIVE SUMMARY

The project entitled “ PROCESS OF AUTO FINANCING BY BANKING SECTOR” with regards to the dealer of Maruti Suzuki India Ltd, “RKBK AUTOMOBILES LTD” is done at a partial fulfillment of my PGDM curriculum.

Business improvement of companies depend on good degree of customers satisfaction . Many time a customer encounters a situation in which he has to take decisions regarding the finance for purchase of new cars and also to sale their preowned cars , customers also need information related to the purchase and sales of cars in which the staff of Maruti company help the cutomers.

Maruti Suzuki India Ltd company redefined the way people looked at cars, Maruti Suzuki ,in the past 20 years Maruti Suzuki has emerged as the undisputed leader in the automobile industry,bringing their customers more cars ,more technology and more satisfaction . Today Maruti company give its customers many reason to smile because it provide each and every facility to its customers at a one shop stop.

From Finance to Insurance, from used cars to genuine accessories .When it Comes to customers car related needs all a customer to do is to just contact with Maruti nearest Dealer and they will take care of the customers needs.

Maruti company provide its cutomers all the facilities and service at one shop. The customers of Maruti can get easily following facilities from their nearest Dealer which is provided by the company –

--Finance --Insurance--Genuine Accessories--Service workshops--Sale and purchase of preowned cars [ True Value Shop ]

7

MSIL (Maruti Suzuki India L td) provide financing facilities to their customers . They have tie-up with different private and goverement banks.

My job profile was there of a financial consultant and I used to provide information to the customers related to auto finance. I use to provide information about the banks which are tie –up with the dealer and the documentation process of banks to the customers, I also calculate the EMI of the auto finance for the customers to gave them knowledge about the EMI which they have to pay after taking finance from the banks. The EMI depends on the amout of the loan which is taken by the customer for their vehicles.All the information related to the documentation process ,EMI ,documents which are needed for loan according to the bank and customersAre given by me .The documents and process of Auto financing are shown below:

Financial Institution which areTie-up with Maruti Suzuki---

1—SBI [ State bank of India ] [Govt Bank]2—PNB [Punjab national bank] [Govt Bank]3—PGB [Purvanchal gramin bank] [Govt Bank]4—ICICI Bank [Indian credit investment corporation of india] [ Pvt Bank]5—HDFC Bank [Housing development finance] [Pvt Bank]6—M&MFSL [Mahindra & Mahindra financial Service Limited] [Pvt

Financer]

Banking Institution provide that much of loan amount which does not exceeds from 2. ½ of the customers net annual income / whose EMI ( equated monthly installment ) does not exceeds 45% of the monthly income (cash in hand).Every Bank or financial institutions have their own way and process to finance the customers. Customers have to fulfill some documents to get the loan from the bank .

8

Documents Needed for Financing by Different Banking Sector

1)—SBI [ State Bank of India ] [ Govt. Bank]

(i)- For Salaried Person

ID Proof [ Pan /VoterI-Card/Passport/Driving Liecence]

Add Proof [House Tax bill/Electricity bill/Telephone bill]

Income Proof --Salary slip [ current month ] --From -16 [ 2 years ]

Banking [ 6 month statement ]

Liquid Security [ FDR/ NSE/INSURANCE]

Quotation from Authorised Dealer

Latest passport size photograph.

Processing charge : 0.5% of loan amount in the form of cheque with loan application.

(ii)— For Business Person

ID Proof Add Proof Income Proof --Sales Tax Registration --Labour Certificate --Small Scale Salary Certificate -- ITR [ 3 years ] Banking statement [ 1 year ] Guaranter Required

9

Liquid Security [ FDR/NSE/INS]

(iii)--MAXIMUM ELIGIBILITY AMOUNT

2.5 Times of net annual income or 30 times of net monthly salary. Margin Money minimum 15%. EMI/NMI not to exceed 50%.

(iv)--ELIGIBILITY CONDITION :

Minimum net annual income 100000/- Permanent employees of STATE/CENTRALGOVT./PSU of

Repute etc. Age of 21 to 65 years.

(V)--INTEREST RATES : Rates Period EMI per Lac

12.25 36 months Rs. 3333/-12.25 60 months Rs. 2237/-12.50 84 months Rs. 1792/-

Used car 36 months 15.75% Above 36 months 16.00%

2)—PNB [ Punjab National Bank] [ Govt. Bank ]

(i) Salaried Person/Business Person

ID Proof Add Proof Age Proof Income Proof Salaried class – Salary certificate/Income tax return. Agricultural class—Record of land holding & cropping pattern or any other income proof.

10

Banking Statement Guaranter Required Liquid Security Minimum 24 advance cheques for payment. Quotation of vehicle from Authorised Dealer. Proof of income spouse where the same is to be considered for

determining loan amount .

(ii)- The purpose of loan should be to purchase New or Old car/jeep/van.

(iii)- Eligibility Individual / Business concern ( Corporate or Non corporate)

(iv)- Margin money of the loan should be not less than 20% of the loan amount .

(v)- Repayment for new car : 84 months. For old cars: 60 months.

(vi)-Upfront fee is 0.75% of the loan amount .

(vii)-Document charges for 300/- upto 2 lacs. for 500/-above 2 lacs.

(viii)-Insurance should be comprehensive with bank clause.

(ix)- Registration should be joint.

3)-ICICI BANK [Indian Credit Investment Corporation of India]

[Govt. Bank]

(i)- For Salaried Person / Business Person

ID Proof & Signature Proof

11

[Pan Card/Passpot/IdCard/Banf pass book/Gun licence/voterId/Driving Licence]

Income Proof [Form-16/ITR ]

Business Proof / Job Confirmation

[ Salary slip/Salary Certificate/In hand Salary]

Add Proof [ Telephone Bill/Gas connection/Driving Licence/Electric Bill/House Tax / Bank pass book.]

Banking Statement [ 6 months ]

(ii)-Maximum Eligibility Condition is minimum annual income Rs.100,000.

(iii)- Service Charges

Upto 2,49,000 -- 2100 Rs. 2,50,000 to 4,99,000 -- 2600 Rs. 5,00,000 & Above -- 3450 Rs.

Charges for late Payment -- 2% per month.

Payment charges -- 5.6% on the outstanding principle. Cheque swap charges – Rs.500/- Cheque bounce charges—Rs.225/-

4)-HDFC BANK [Housing Development Finance Corporation] [Pvt Bank]

(i)- Salaried Person

12

Eligibility Criteria: Minimum age of Applicant: 21 years Maximum age of Applicant at loan maturity: 58 years Minimum employment: 1 year in current employment and minimum 2

years of employment Minimum Annual Income: Rs 100000 net annual income Telephone: Must at residence

Documents required: Proof of Identity:- Passport copy, Pan Card, Voters Id car, driving

licence( Laminated, Recent, Legible) Income Proof:- Latest salary slip with form 16. Address Proof:- Ration card/Driving licence/Voters card/passport

copy/telephone bill/ electricity bill/Life insurance policy PAN Card. Bank Statement:- Not mandatory

(ii)- Self Employed Person

Eligibility Criteria: Minimum age of Applicant: 21 years Maximum age of Applicant at loan maturity: 65 years Minimum employment: Atleast 3 years in business Minimum Annual Income: Net profit Rs. 60000 p.a for standard cars

and Rs.100000 p.a. for mid-sized and premium cars Telephone: Must at residence

Documents required: Proof of Identity:- Passport copy, PAN Card, Voters Id car, driving

licence( Laminated, Recent, Legible) Income Proof:- Latest ITR Address Proof:- Ration card/Driving licence/Voters card/passport

copy/telephone bill/ electricity bill/Life insurance policy PAN Card

13

Bank Statement:- Waived for small cars, for mid - sized and premium cars if income Is greater than Rs. 1.5 lacs then bank statement requirement can be waived.

(iii)-Partnership Firms

Eligibility Criteria: Minimum Income: Net profit Rs. 60000 p.a for standard cars and

Rs.100000 p.a. for mid-sized and premium cars Minimum turnover: Turnover Rs. 4.5 lacs Telephone: One phone at least at business and at residence of the

loan executing partner.

Documents required: Proof of Identity:- NA Income Proof:- Audited balance sheet, Profit & Loss Account for

latest two years and the latest 2 years IT returns of the company Address Proof:- Telephone Bill/Electricity Bill/Shop &

Establishment Act certificate/SSI registered certificate/Sales Tax certificate

Bank Statement:- Waived for small cars, for mid - sized and premium cars if income Is greater than Rs 1.5 lacs then bank statement requirement can be waived

(iv)-Private Limited Company

Eligibility Criteria: Minimum Income: Net profit Rs. 60000 p.a for standard cars and

Rs.100000 p a for mid-sized and premium cars Minimum turnover: Turnover Rs 4.5 lacs Telephone: One phone at least at business premises

Documents required: Proof of Identity:- NA

14

Income Proof:- Audited balance sheet, Profit & Loss Account for latest two years and the latest 2 years IT returns of the company

Address Proof:- Telephone Bill/Electricity Bill/Shop & Establishment Act certificate/SSI registered certificate/Sales Tax certificate

Bank Statement:- NA

(v)-Public Limited Company

Eligibility Criteria: Minimum Income: Net profit Rs. 60000 p.a for standard cars and

Rs.100000 p a for mid-sized and premium cars Minimum turnover: Turnover Rs 4.5 lacs Telephone: One phone at least at business premises

Documents required: Proof of Identity:- NA Income Proof:- Audited balance sheet, Profit & Loss Account for

latest two years Address Proof:- Telephone Bill/Electricity Bill/Shop &

Establishment Act certificate/SSI registered certificate/Sales Tax certificate

Bank Statement:- NA

(vi)-Fees & Charges for New Car Loans

Description of charges New car loans

15

Cheque bouncing charges Rs. 450

FC Charges

6 % of POS for preclosures within 1 year from 1st EMI5% of POS for preclosures within 13-24 months from 1st EMI3% of POS for preclosures post 24 months from 1st EMINo foreclosure allowed within 6 months from date of availing the car loan

Stamp Duty At actual

Late Payment Penalty 2% per month

Processing feesUpto 2.5 Lacs : Rs.1600/-2.51 to 4 lacs : Rs.2500/-> 4 Lacs :Rs. 3000/-

Agri /PSL Charges Rs 2000

Cheque swapping charges Rs 500/-

Loan cancellation / re-booking charges

Rs 1000/-

Bounce Cheque Charges Rs 450/-

Statement Charges (per statement)

Rs 500/-

Duplicate Repayment Schedule charges

Rs 500/-

Legal, Repossession & Incidental charges

At actual

Duplicate no due certificate / NOC

Rs 500/-

Transaction fees for Suraksha Kavach

Rs 500/- per case

The above are the details of the autofinancing documentation process and documents which a customer have to fufill for taking car loan .All these

16

documents and documentation process are different for the customers accordind to the banks.

17

COMPANYPROFILE

CHAPTER – 1 COMPANY PROFILE

18

(i)- Name of the company:

Maruti Suzuki India Ltd

TypePublic (BSE MARUTI, NSE MARUTI)

Founded1981[1]

HeadquartersGurgaon, Haryana, India

Key peopleJagdish Khattar, CEOShinzo Nakanishi, Managing Director

IndustryAutomotiveProductsCarsRevenue▲~$2.5 billion (2005)

Employees6,903[2]

Websitewww.marutisuzuki.com

(ii)- Board of Director of the Company:

Maruti Suzuki Limited a s Board-Managerial company. Currently the directors on the Board are -:

# Mr.R.C.Bhargava, Chairman# Mr.Shinzo Naganishi ,Managing Director & Chief Executive# Mr.Keiichi Asai , Director# Mr.Hirofumi Nagao ,Joint Managing Director# Mr.Tsuneo Ohashi ,Director (Production)# Mr.Shuji Oishi , Director (Marketing & Sales)# Mr.Osamu Suzuki ,Director# Mr.D.S.Brar ,Director# Mr.Amal Ganguli , Director# Mr.Pallavi Shroff ,Director# Mr.Manvindar Singh Banga , Director (iii)-Objectives of Maruti Company:

The objectives of Maruti Suzuki India Ltd which are given in their Memorandum of Association are :

19

1. To acquire and take over from GoI the right, title, and interest in relation to the undertakings of Maruti Ltd. As provided for in the appropriate enactment of GoI together with the liabilities of GoI so far as they arerelated to the Undertakings of the Company.

2. To carry on the business of manufacturers of, and dealers in, automobiles, motorcars, lorries, buses, vans,motorcycles, cycle-cars, motor, scooters, carriages, amphibious vehicles, and vehicles suitable for propulsion onland, sea, or in the air or in any combination thereof and vehicles of all descriptions (all hereinafter comprised in the term “motor and other things”), whether propelled or assisted by means of petrol, diesel, spirit, steam, gas,electrical, animal, or other power, and of internal combustion and other engines, chassis-bodies and other components, parts and accessories and all machinery,implements, utensils, appliances, apparatus, lubricants, cements, solutions enamels and all things capable of being used for, in, or in connection with manufacture, maintenance, and working of motors and other things or in the construction of any track or surface adapted for the use thereof.

3. To carry on the business of garage keepers and suppliers of and dealers in petrol, electricity and other motive power for motors and other things.

4. To carry on in the business of iron founders, mechanical engineers, and manufacturers of machinery, tool makers, brass founders, metal workers, boiler makers, mill rights, machinists, iron and steel converters, smiths,wood workers, builders, electroplaters, chromium platers, lacquerers, enamellers, painters, metallurgists, electrical engineers, and printers and to carry on any branch of manufacturing and engineering business.

MUL’s Principal Objectives

As the leading player in the small car segment of the Indian market, they have the following principal objectives:

20

To expand the size of the Indian market for small cars by strengthening and expanding the dealer network and making automobile financing available at competitive rates

To strengthen their leadership position in the small car segment of Indian market; and

To continue to benchmark themselves against improving global manufacturing, marketing and other practices and standards, strive to increase customer satisfaction through quality products and new

initiatives, and promote the financial strength of their sale network.

1. Modernization of the Indian Automobile Industry2. Production of fuel-efficient vehicles to conserve scarce resources3. Production of large number of motor vehicles which was necessary

for economic growth Maruti Udyog Limited is the largest passenger car manufacturer in India with an annual capacity of 470,000 cars. Turnover of $2.2 billion and with an incredible ability to rollout a car in 45 min.

4. Exporting Cars to various countries5. Single Spares Distribution Center for the entire country- Annual

spares turnover of $130 million6. Heavy Inbound and Outbound material flow7. In-house developed ERP System8. Dedicated Systems Maintenance Deptt.

MUL’s Competitive Strengths

Expertise in small car technology. As a subsidiary of Suzuki, they have access to globally respected technology in the small car segment. They have the advantage of Suzuki’s expertise in all aspects of small car technology and design, with respect to their products, manufacturing processes and business practices, the development of their supply chain and the training of personnel.

21

Extensive product portfolio. Their diverse product range includes cars in segments A, B and C, and utility vehicles.. They are the major manufacturer of cars in segment A (priced below Rs.300,000). The Maruti 800 has been the largest selling car in India for several years, and still continues to have the veryhigh sales volumes. They also manufacturer three distinct models, the Zen, the Alto and the WagonR, in segment B (priced between Rs. 300,000 and Rs.500,000). Their dominance in segment A and extensive product range in segment B enables them to offer the customer a wider choice in the small car segment than any of their competitors. In addition, the absence of any major manufacturers in segment A gives their dealers greater flexibility in promoting models in segment B.

Quality products. In November 2001, MUL was one of the first automobile manufacturers in the world to receive the ISO 9001:2000 certification. They benchmark their products against international quality standards. They export heir products to approximately 70 countries, which are manufactured using the same assembly line as that for the domestic market.

Extensive sales and service network.

MARUTI SUZUKI INDIA LTD (in one view) –

Logo of Maruti ---

Incorporated --- February 1981

Foreign partner --- Suzuki Motors of Japan

Joint venture agreement --- October 1982

Equity Structure --- 54.2%, Suzuki, Japan, balance with

22

The other financial institutions.

Sales( No of cars) --- 764,842 including 53,024 exports.Financial year 2007-08

Sales(Net of excise) --- INR- 178603 MillionFinancial year 2007-08 Yen- 449 Billion $ - 4.512 Billion

Profit after tax --- INR – 17308 MillionFinancial year 2007-08

Employee strength --- 7090 of financial year 2007-08

Facilities --- Gurgaon : 3 vehicle assembly plants Manesar : 1 vehicle assembly plant . Head office in New Delhi. Regional offices : 16

Diesel Powertrain Plant --- Suzuki Powerstrain India Limited (SPIL). Joint venture 70% equity the rest is with Maruti Suzuki India Ltd. Global hub for Diesel engines and transmissions.

Joint Venture --- 15 joint venture companies, including Suzuki Power Supply.

Subsidiary Companies --- True Value : for sales and purchase of Preowned cars.

Maruti Insurance : for the insurance of Maruti vehicles. Maruti Finance : for financing Maruti Vehicle.

Product Portfolio --- 11 Models with around 100 variants including: Maruti 800 , Omni

23

Alto , WagonR Swift , Zen Gypsy , Dzire Versa , Sx4 Grand vitara .

Proposed Investment --- INR – 9000 crores i.e.2010 INR – 90 Billion

Yen - 257 Billion ( 1$= 40 Rs.)

Network Reach financial year --- Sales 600 outlets covering 393 cities. Service 2628 workshops covering 1220 cities. Preowned Car Sales 266 covering 166 cities.

(iii)- Partner of the company :

SUZUKI MOTOR CORPORATION

"Way of Life!"

Suzuki Motors is a Japanese company which makes world class cars in India as a joint venture with Maruti Udyog Ltd. of India. Suzuki is also one of the leading motorcycles manufacturers in the world. The company makes sports utility vehicles (SUVs), all terrain vehicles (ATVs), minicars, premium and luxury cars.

HISTORY

24

Michio Suzuki promoted Suzuki under the name Suzuki Loom Works in 1909, in the town of Hamamatsu, Japan. The firm was in the business of manufacturing weaving looms. The firm was incorporated as Suzuki Loom Manufacturing Co. in March 1920. With the objective of diversification, Michio Suzuki decided to enter into the small car business, and built several innovative small car prototypes in the late 1930s. The name of the company was then changed to Suzuki Motor Co., Ltd in June 1954. In 1954 Suzuki was manufacturing 6,000 motorcycles per annum.The company launched its first lightweight car, “Suzulight”, in 1955. By the early 1960s, Suzuki’s products were being sold in the European and US markets. Over the next few decades, Suzuki gained a reputation as a top manufacturer of small cars. By 1977, Suzuki started selling its outboard motors in the US, maintaining a rich tradition of innovation in all its product offerings.In October 1990, the name of the company was changed to Suzuki Motor Corporation.Some of the other products manufactured by Suzuki include outboard motors, generators,welders, general-purpose engines, boats, motorized wheelchairs, electro-scooters, ultrasonicrelated products (cleaner, cutter, etc.) and pre-fabricated houses.

SUZUKI AND MARUTI

Suzuki has always played, and continues to play, an important role in the management of our Company. Some of our key management personnel and technical personnel are deputed Suzuki.Currently, two of our directors are also directors of Suzuki. In 1982, Suzuki acquired a 26%stake in our Company. Since then, Suzuki has increased its stake in our Company and currently holds about 54.2%. Suzuki provided us access to some of their products, licensed their technology, shared with us their best practices in manufacturing processes and helped us develop and manage our supply chain. Suzuki has also provided support in training our personnel and integrating Japanese management practices such as Kaizen in our plant.Due to our collaborative efforts, we believe that we have become more efficient than many of Suzuki’s plants worldwide.

25

Quick Facts

FounderMichio Suzuki (in Hamamatsu, Shizuoka Prefecture Japan)

Country Japan

Year of Establishment 1909

Industry Auto-Cars/Light Trucks

Listings & its codes TYO: 7269; OTC: SZKMF

Joint Venture Maruti Udyog Ltd. (in India)

Head Office 300 TakatsukaHamamatsuShizuoka 432 8611 Japan

India Office Maruti Udyog Ltd.11th Floor, Jeevan Prakash 25, Kasturba Gandhi Marg New Delhi - 110001, India Tel.: +(91)-(11)-23316831 (10 lines) Fax: +(91)-(11)-23318754, 23713575

Website www.suzuki.com

Global Website www.globalsuzuki.com

Segment and Brands

Products Brands

Motorcycles Sportbike

Hayabusa 1300 Limited

Hayabusa 1300 GSX-R1000 GSX-R750 20th

Anniversary GSX-R750 GSX-R600 20th

Anniversary

SV1000S SV650S SV650 Katana 750 Katana 600

GS500F

26

GSX-R600 Cruiser

Boulevard M109R Boulevard M50 Boulevard M50

Limited Boulevard C90 Boulevard C90 Black

Boulevard C90T

Boulevard C50 Boulevard C50 Black Boulevard C50T Boulevard S83 Boulevard S50

Boulevard S40

Touring

Boulevard C90T Boulevard C50T Motocross

RM-Z450 Carmichael Replica

RM-Z450 RM250

RM-Z250

RM125 RM85L

RM85

Standard

GZ250 SV1000S SV650S SV650

Suzuki Heat

V-Strom 1000 V-Strom 650 ABS V-Strom 650

Suzuki Zeus

DualSport SV1000S SV650S SV650 V-Strom 1000 V-Strom 650 ABS V-Strom 650

V-Strom 1000

V-Strom 650 ABS V-Strom 650 DR650SE DR-Z400S DR-Z400SM

DR200SE

Supermoto

DR-Z400SM Off Road

DR-Z400E DR-Z125

27

DR-Z250

DR-Z125L JR50 Kids

DR-Z125L DR-Z125

JR50

RM85L

RM85

(iv)- Regional office of the company:

Factory/plant C-119, Naraina Industrial Area, New Delhi - 110028Delhi - IndiaPhone : Fax : Email : N.A.Internet : N.A.

Secretarial Office 11th Floor, Jeevan Prakash Building, New Delhi - 110001Delhi - IndiaPhone : 23316831 (Ext.323)Fax : 23318754Email : sharma.rajeev@maruti.co.inInternet : N.A.

Regional Office West II: 505, Satkar Complex, Behind Swagat Building, Off C.G Road, PanchwatiAhmedabad - 380006Gujarat - IndiaPhone : Fax :

28

Email : N.A.Internet : N.A.

Regional Office Central: Ground Floor, Block B-1, PICUP Bhawan, Lucknow - 226010Uttar Pradesh - IndiaPhone : Fax : Email : N.A.Internet : N.A.

Regional Office North East: 403, Orion Tower, Christan Basti, G S Road Guwahati - 781005Assam - IndiaPhone : Fax : Email : N.A.Internet : N.A.

Regional Office South II: 201, Second Floor, Embassy Classic, Bangalore - 560001Karnataka - IndiaPhone : Fax : Email : N.A.Internet : N.A.

Registered Office 11th Floor, Jeevan Prakash Building, 25, Kasturba Gandhi Marg New Delhi - 110001Delhi - IndiaPhone : 23316831, 23316832, 23316833, 23316834Fax : 23318754, 23713575Email : investors@maruti.co.in

29

Internet : N.A.

Regional Office North I: 6th Floor, Hansalaya Building, New Delhi - 110001Delhi - IndiaPhone : Fax : Email : N.A.Internet : N.A.

Regional Office North II: SCO 39-40, Sector 8 C, Chandigarh - 160018Chandigarh - IndiaPhone : Fax : Email : N.A.Internet : N.A.

Regional Office South I: 7th Floor, Capital Tower, 180 Kodambakkam High Road, Chennai (Madras) - 600034Tamil Nadu - IndiaPhone : Fax : Email : N.A.Internet : N.A.

Regional Office East: L&T Chambers (4th Floor), Kolkata - 700016West Bengal - IndiaPhone : Fax : Email : N.A.Internet : N.A.

30

Regional Office West I: 6th Floor, Madhava Building, Bandra-Kurla Complex, Mumbai - 400051Maharashtra - IndiaPhone : Fax : Email : N.A.Internet : N.A.

Factory/plant Palam Gurgaon Road Gurgaon - 122015Haryana - IndiaPhone : 8340341,8340342,8340343,8340344Fax : 8341304-8340209Email : N.A.Internet : N.A.

Service Centre C 119 Naraina Industrial Area New Delhi - 110028Delhi - IndiaPhone : Fax : Email : N.A.Internet : N.A.

31

(a)- HISTORICAL BACKGROUND

Evolution of the Indian Passenger Car industry:

During 1960s and the 1970s there were only two manufacturers in the market, Hindustan Motors and PremierAutomobiles with limited production capacities. The import of passenger cars was restricted to the State Trading Corporation (STC) and foreign diplomats.During that period the passenger car industry in India grew at a nominal CAGR of approximately 3.6%. The rate of customs duty levied on cars was 225%.

The Revolution

Maruti created history by going intoproduction in a record 13 months. On 14 December1983, the then Prime Minister of India, Mrs Indira Gandhi,handed over the keys of the first car to Mr. Harpal Singh of Delhi. Volume targets were routinely exceeded, and in March 1994, it became the first Indian company to produce over one million vehicles, a landmark yet to be achieved by any other car company in India. Maruti is the highest volume car manufacturer in Asia, outside Japan and Korea, having produced over 3.5 million vehicles by December 2001. Maruti is one of the most successful automobile joint ventures, and has made profits every year since inception till 2000-01. In 2000-01, although we generated operating profits on an income of Rs 92.5 billion, high depreciation on new model launches resulted in a book loss. We are again on track for profits in 2001-02, with a profit of Rs 300 million in the first half. In this period, sales were increased by 5.3%, against an industrv decline of 6.1 %. We revolutionized the wav Indians looked at cars. "No other car company so completely dominates its home market" - (The Economist). Despite there being 11 companies now in the passenger car market, Maruti holds about 60 % of the total market share. MUL is also the first and only car company in the world to lead its home market in terms of both market share and in the JD Power Customer Satisfaction study (JD Power Asia Pacific 2000 India Customer Satisfaction studies).

32

Transfer of Technology

Every minute two vehicles roll out of the Maruti Plant. It is therefore imperative that the transfer of contemporary technology from our partner Suzuki is a smooth process. Great stress is laid on training and motivating the people who maintain the equipment, since the best equipment alone cannot guarantee high quality and productivity. From the beginning it was a conscious decision to send people to Suzuki Motor Corporation for on-the-job training for line technicians, supervisors and engineers. This helps them to imbibe the culture in a way that merely transferring technology through documents can never replicate. At present 20 % of our workforce is trained under this program.

Background:

Maruti Udyog Limited (MUL) was established in February 1981 through an Act of Parliament,to meet the growing demand of personal mode of transport caused by lack of public transport system. Maruti is India's largest automobile company, a joint venture with Suzuki of Japan.Company’s goal was to provide fuel efficient, low-cost vehicles, which were reliable and of high quality and other to offer customers a friendly sales and after sales service. MUL throughout the years have offered contemporary Japanese Technology, suitably adapted to Indian conditions and Indian car users. It also provided users with a range of cars to suit different needs. The company is a leader in the mini and the compact segment and is positioned third in the Mid size segment in spite of the intense competition.The Company offers variety of services enabling them to act as a one-stop shop for its customers. These services include finance, insurance, true value for pre-owned cars and corporate lease & fleet management.

MUL’s Positives:

# Leaders in the Passenger car segment for more than a decade backed by a strong foreign promoter who is a world leader in the automobile market.

# Entry into diesel Segment (i.e. 20% of the passenger car market).

33

# Setting up a Joint Venture with Suzuki to manufacture diesel engine that will enable it toreduce cost as most of the other players import the diesel engine.

# Expanding capacity to meet the growing demand of the passenger car market.

MUL’s Negatives:

# Concern on rising input cost.# Concern on increasing fuel prices.

Market share of MUL:

Segments FY2000 FY2005Mini 100.0% 100.0%Compact 33.2% 50.3%Mid size 24.0% 14.2%

Maruti’s entry into the Indian Passenger Car Market:

MUL was the result of the joint venture created in February 1981 between Japan's Suzuki Motor Company and the Indian Government when the latter decided to produce small, economical cars for the masses. The intention of the venture was to produce a 'people's car'. To get the project off the ground MUL took over the assets of the erstwhile Maruti Ltd., which was set up in 1971 and closed in 1978.It was on December 14, 1983 that MUL launched the first Maruti vehicle - the Maruti 800. The first model was the SS80, a 796cc hatchback car priced at Rs. 47,500. Subsequently, in spite of price hikes, the car has remained within the reach of the Indian middle class and has been a runaway success. Available in vibrant colures when India's passenger car population comprised mainly. Ambassadors and Fiats in black and white, M800 gave Indians the first taste of global quality and reliability.

34

In late1980s, Suzuki increased its equity stake in MUL from 26% to 40% and further to 50% in 1992, converting Maruti into a non-government company.In the years that followed, MUL consolidated its position with a line of Indian classics, such as the eight-seat Omni, the rough-terrain Gypsy, and,in October 1990, a 3-box Maruti 1000. MUL took the lead in the green drive by launching its CNG-run Omni and Maruti 800 in 1999.

MUL redefined the premium compact segment with the launch of the Zen in October 1993. It was the company's first 'world car, selling across multiple markets. A year later, the Zen had won several awards, including 'No. 1car in Europe' (Auto Week, 1994), 'No.1 import in Europe' (1997) and 'most fuel-efficient car' (ADAC).

In 1999, MUL launched Baleno and WagonR. Baleno targeted the premium mid-segment while WagonR was positioned as a multi-activity vehicle.

In1999, to improve customer satisfaction, it even established a chain of model workshops and soon after, set up customer call centers in the metros.

In 2000, Maruti Suzuki introduced Alto - a premium small car targeting the export market - and in October 2001,Versa,multipurpose vehicle.

In May 2002, Suzuki took management control of Maruti.

In April 2003, MUL rolled out its latest offering, the Grand Vitara XL-7, a luxury SUV imported from Suzuki Motor Corporation. The Grand Vitara was a concept that was radically different from the models thatcomprised the bulk of MUL's sales.

Since 1980 with its product excellence, operational efficiency and customer intimacy Maruti Suzuki has been the leader in Indian passenger car market.

35

INTRODUCTION OF MARUTI COMPANY

The old logo of Maruti Suzuki India Limited. Later the logo of Suzuki Motor Corp. was also added to it

Maruti Suzuki is one of India's leading automobile manufacturers and the market leader in the car segment, both in terms of volume of vehicles sold and revenue earned. Until recently, 18.28% of the company was owned by the Indian government, and 54.2% by Suzuki of Japan. The Indian government held an initial public offering of 25% of the company in June 2003. As of May 10, 2007, Govt. of India sold its complete share to Indian financial institutions. With this, Govt. of India no longer has stake in Maruti Udyog.

Maruti Udyog Limited (MUL) was established in February 1981, though the actual production commenced in 1983. Through 2004, Maruti has produced over 5 Million vehicles. Marutis are sold in India and various several other countries, depending upon export orders. Cars similar to Marutis (but not manufactured by Maruti Udyog) are sold by Suzuki in Pakistan and other South Asian countries.

The company annually exports more than 30,000 cars and has an extremely large domestic market in India selling over 500,000 cars annually. Maruti 800, till 2004, was the India's largest selling compact car ever since it was launched in 1983. More than a million units of this car have been sold worldwide so far. Currently, Maruti Alto tops the sales charts.

Due to the large number of Maruti 800s sold in the Indian market, the term "Maruti" is commonly used to refer to this compact car model. Till recently the term "Maruti", in popular Indian culture, was associated to the Maruti 800 model.

Maruti Suzuki India Limited, a subsidiary of Suzuki Motor Corporation of Japan, has been the leader of the Indian car market for over two decades.

It’s manufacturing facilities are located at two facilities Gurgaon and Manesar south of New Delhi. Maruti’s Gurgaon facility has an installed capacity of 350,000 units per annum. The Manesar facilities, launched in February 2007 comprise a vehicle assembly plant with a capacity of 100,000 units per year and a Diesel Engine plant with an annual capacity of 100,000 engines and

36

transmissions. Manesar and Gurgaon facilities have a combined capability to produce over 700,000 units annually

More than half the cars sold in India are Maruti cars. The company is a subsidiary of Suzuki Motor Corporation, Japan, which owns 54.2 per cent of Maruti. The rest is owned by the public and financial institutions. It is listed on the Bombay Stock Exchange and National Stock Exchange in India.

During 2007-08, Maruti Suzuki sold 764,842 cars, of which 53,024 were exported. In all, over six million Maruti cars are on Indian roads since the first car was rolled out on December 14, 1983.

Maruti Suzuki offers 10 models, ranging from the people’s car, Maruti 800, for less than Rs 200,000 ($ 5000) ex-showroom to the premium sedan SX 4 and luxury SUV, Grand Vitara.

Suzuki Motor Corporation, the parent company, is a global leader in mini and compact cars for three decades. Suzuki’s technical superiority lies in its ability to pack power and performance into a compact, lightweight engine that is clean and fuel efficient.

Maruti is clearly an “employer of choice” for automotive engineers and young managers from across the country. Nearly 75,000 people are employed directly by Maruti and its partners.

The company vouches for customer satisfaction. For its sincere efforts it has been rated (by customers)first in customer satisfaction among all car makers in India for seven years in a row in annual survey by J D Power Asia Pacific.

Maruti Suzuki was born as a government company, with Suzuki as a minor partner, to make a people’s car for middle class India. Over the years, the product range has widened, ownership has changed hands and the customer has evolved. What remains unchanged, then and now, is Maruti’s mission to motorise India.

MARUTI COMPANIES ACCOLADES –

2007 India Customer Satisfaction Index Award :The biggest draw even this year was the award for highest Automotive Customer Satisfaction Index. Maruti Suzuki scored the highest in customer satisfaction index for the eighth consecutive year.

37

2007- India Automotive Performance, Execution and Layout Study (APEAL) Award :Three popular cars namely Maruti Zen Estilo, Maruti Swift and Maruti SX4 walked away with the APEAL awards in their respective categories.

2007 India Initial Quality Study:In the Initial Quality Study, Maruti Swift walked away with the highest IQS in the Premium Compact car segment.

Other categories

In SSI ( Sales Satisfaction Index) which evaluates customer satisfaction at the point of purchase- We posted a hat-trick with three consecutive wins in 2004-06.

In APEAL (Automotive Performance Execution Layout Award)- Our cars Wagon R and Alto scored the highest, for second Consecutive year, for the year 2006.

In IQS (Initial Quality Study)- Zen ( the old model) scored the highest followed by Wagon R and Alto in their respective year 2006.

(b)- HEAD OFFICE

Secretarial Office 11th Floor, Jeevan Prakash Building,

25,Kasturba Gandhi Marg. New Delhi - 110001Delhi - IndiaPhone : 23316831 (Ext.323)Fax : 23318754Email : sharma.rajeev@maruti.co.inInternet : N.A.

38

(c)- BRANCH OFFICE

Maruti Company has many Branch Offices in the whole country to serve their customers which are in the following areas:

(a)- West UP, Uttarakhand ,Delhi,Gurgaon,Noida,Gaziabad,Rewrai,Mahendragarh.

(b)- Punjab,Chandigarh,Jammu&Kashmir.

(c)- Part of UP and Uttarakand.

(d)- Haryana , Himanchal Pradesh.

(e)- Orrisa ,West Bengal,Sikkim,Andman&Nicobar.

(f)- Bihar ,Chattisgarh,Jharkhand.

(g)- Arunanchal Pradesh ,Assam,Manipur,Meghalaya,Mizoram,Nagaland,Tripura.

(h)-Madhaya Pradesh.

(i)- Mumbai,Navi Mumbai,Thane & Goa.

(j)-Rest of Maharastra.

(k)- Gujrat.

(l)- Rajasthan.

39

(m)-Tamil Nadu,Pondichery.

(n)- Karnataka.

(o)- Kerala.

(p)- Andra Pradesh.

40

(d)- VISSION & MISSION STATEMENT

Our Vision:

The Leader in Indian Automobile Industry, creating customer delight and shareholder’s wealth; a pride of India.

Mission Statement:

(i) Provide superior products and services to our customers and maintain market leadership.

(ii) Evolve as an institution that serves the best interest of all stakeholders.(iii) Pursue excellence through total quality management.(iv) Ensures the highest standards of ethics and integrity in all our action.

FACILITY of MANUFACTURING

The core focus areas of our manufacturing division are:

benchmarking ourselves against global standards to efficiently manufacture quality products; and

building a strong and motivated work force by emphasizing safety, education and continuous improvement of our manufacturing capabilities and those of our vendors.

Our Manufacturing Facility and Process :

Our manufacturing facility comprises three integrated plants with flexible assembly lines located at Gurgaon in the northern state of Haryana. The first plant was set up in fiscal 1984 with an initial installed capacity to produce 20,000 vehicles per annum, which was augmented to 130,000 by fiscal 1991. Installed capacity was further increased with the second plant becoming operational in fiscal 1995 to 200,000 vehicles per year. In fiscal 1996, with

41

capacity increases in each plant, installed capacity increased to 250,000. With the third plant becoming operational in March 1999, installed capacity increased to 350,000 vehicles per year, which is the highest among passenger car manufacturers in India and among the passenger car manufacturing facilities of Suzuki’s subsidiaries outside Japan.Our facility has advanced engineering capability and is upgraded on an ongoing basis to improve productivity and quality. We have 17 manufacturing shops and are capable of producing more than 50 variants of the nine basic models manufactured, with different specifications, within the same day. This is possible due to our information technology-enabled vehicle build sequence system and vehicle tracking system. Under the vehicle build sequence system, at the production planning stage, requirements are communicated via our intranet (internally) and our extranet (to vendors) in advance as to the time and place for delivery of components and other production inputs in order to fulfill production targets. Our vehicle tracking system monitors and recordsthe implementation of the planning during production.

Looking Ahead:

Maruti Company is looking ahead in Rural Areas to epnd their sales in that field .Maruti company is the first Automotive company which is looking in this field to epand their sales .

Our Views:# MUL’s Q4FY05 results were largely in line with expectations.Declining sales of M-800 and a Rs 10,000-15,000 price hike in Jan’05 helped improve unit realizations. This resulted in revenue growth outpacing volumes growth. Marketing and promotion expenses fell by 56% YoY to Rs 570mn for the period. This more than compensated for the rise in raw material costs, boosting operating margins by 320 bps for the period.

# We believe the growth in the domestic passenger car industry will be driven by rising disposable incomes, growing number of middle and high income households and easier access to low cost credit. After posting growth in excess of 20% in the last two years, we expect it to taper off to 10-15% in FY06. MUL, with its diverse product portfolio and strong presence in the ‘B’ segment, is well positioned to benefit from the emerging scenario.

42

# In Jun’05, MUL is launching a premium hatchback, Swift, priced around the Rs 400-450K level.The model will fill the gap between the high end Wagon-R/Zen and the entry level Esteem. At this price, it is well positioned to take on Hyundai Getz which has clocked sales of just 1,400 units per month since its launch. MUL has targeted annual sales of 40,000 to 50,000 units for the model.

# MUL’s current capacity is about 600,000 units per annum. In order to cater to the industry growth in the future, MUL is setting up a new manufacturing plant as part of a 70:30 JV with Suzuki Motors. The plant is expected to begin production by end of 2006 and will have an initial capacity of 100,000 units per annum. Total investment for the project will be Rs 15.2 bn.

# Diesel cars currently form around 20% of overall domestic sales, with

Tata Motors being the market leader. The market is set to grow further given the improvement in diesel engine technology and price differential vis-a-vis petrol. In order to substantially increase its presence in this segment,MUL has formed a 49:51 JV with Suzuki Motors to set up a diesel engine plant having an initial capacity of 100,000 units, which will eventually be ramped up to 300,000 in phases. The plant is expected to come up by the end of 2006 and will require an investment of Rs 17.4 bn.

# In FY06, we expect MUL’s volumes to grow by 12.5% YoY to 603,000 units. Growth will bedriven by the ‘B’ and ‘C’ segment models. M-800 sales will continue to suffer as it is graduallybeing replaced by Alto as the entry level model. Higher share of ‘B’ and ‘C’ segment models coupled with growing service income will lead to revenues rising by 14% YoY to Rs 124.6 bn.

# On the expenditure front, raw material costs will continue to be under pressure due to rising metal prices. In addition, a change in the product mix in favor of higher end models will also increase RM cost as a percentage of net sales.Wexpect marketing expenses to rise on back of a model launch. However, other expenditure will fall as fixed costs get spread over higher volumes. We expect MUL’s operating margins to remain flat at 12.1% in

43

FY06. Falling interest charges and higher service income will help net profit to grow by 20% YoY to Rs 10.3 bn.

# At the CMP of Rs 437, MUL is fairly valued at a P/E of 12.3x and EV/EBIDTA of 6.3x its FY06E earnings. Being the market leader with acomprehensive product range, MUL is a strong play on the growing passenger car market. However,rising raw material and marketing expenses will keep cap the operating margins. Thus, we arecommend a ‘HOLD’ on the stock.

44

TRADEPOLICY

45

CHAPTER -2 TRADE POLICIES

Maruti Company is the Automobile company which is using Automotive trade policy in their organisation and they are also using CSR(Corporate Social Responsibility) in their business to expand their trade.Maruti company is using also some government policies,which are made by government for automotive Industry to expand their business and to be successful in the automotive market . The trade policies which are used by company are :

# Automotive trade policy

# Corporate Social Responsibility Policy

Roles and Function of Automotive Trade Policies in Maruti Company :

Provide member companies with ongoing economic and analytical services on developments in the global auto industry and on worldwide automotive trade, economic and investment trends.

Provide a forum for member companies to discuss and coordinate best approaches to common international challenges.

Prepare consensus policy positions and supporting materials. Serve as primary advocate representing the member companies'

common positions with the principal agencies for international trade and economic policy of the U.S. Government.

Establish ongoing communication with the press and media concerning the member companies' views and perspectives in international trade and economic policies and trends.

Represent industry's views to representatives of foreign governments and industry.

Work with business organizations, such as the National Association of Manufacturers and the US Chamber of Commerce on broader-based international issues of interest to the business community.

46

Maintain ongoing liaison activities and potentially increased cooperation on global issues with foreign auto and auto-related organizations.

Coordinate positions, when possible, with other automotive associations both in the United States and overseas.

CURRENT STATUS OF INDIAN AUTOMOTIVE INDUSTRY:

# The industry encompasses commercial vehicles, multi-utility vehicles, passenger cars, two wheelers, three wheelers, tractors and auto components. There are in place 15 manufacturers of cars and multi utility vehicles, 9 of commercial vehicles, 14 of Two/Three Wheelers and 10 of Tractors besides 5 of engines. With an investment of Rs.50,000 crores, the turnover was Rs. 59,500 crores in Automotive Sector during 1999-2000. It employs 4,50,000 people directly and 100,00,000 people indirectly and is now inhabited by global majors in keen contention.

# India manufactures about 38,00,000 2-wheelers, 5,70,000 passenger cars, 1,25,000 Multi Utility Vehicles, 1,70,000 Commercial Vehicles and 2,60,000 tractors annually. India ranks second in the production of two wheelers and fifth in commercial vehicles.

# India’s automotive component industry manufactures the entire range of parts required by the domestic automobile industry and currently employs about 250,000 persons. Auto component manufacturers supply to two kinds of buyers – original equipment manufacturers (OEM) and the replacement market. The replacement market is characterised by the presence of several small-scale suppliers who score over the organised players in terms of excise duty exemptions and lower overheads. The demand from the OEM market, on the other hand, is dependent on the demand for new vehicles.

# The auto sector (excluding Tractors) attained a steep cumulative annual growth of 22% between 1992 and 1997. The Tractors achieved a cumulative annual growth of 16%. Component production grew by 28%. There has been a slowdown in the automobile sector in the past two years. However, the component industry maintained a low but positive growth rate mainly due to

47

its export performance. Over the years, the component industry has maintained a 10% - 12% share of exports in the total production.

# Roads occupy an eminent position in transportation as they, as per the present estimate, carry nearly 65% of freight and 87% of passenger traffic. Although, India has 3.3 million kilometers of road network, which is the second largest in the world, the Indian highways are getting overpopulated. Traffic management and road sense also need attention.

NEED FOR A COMPREHENSIVE AUTOMOTIVE POLICY

# The extant policy has drawn many overseas companies into India but needs to be more investor friendly, address emerging problems and be WTO compatible. The Indian car market is full of possibilities; but present demand profile inhibits volume production, save by a few, and conduces contention rather than competition. World over, the majors have consolidated to elevate technology, enlarge product range, access new markets, cut costs and ingraft versatility. They have resorted to common platforms, modular assemblies and systems integration by component suppliers and E-Commerce.

# The automotive industry is in the midst of a major structural transformation in today's globalised scenario. "System Supply" of integrated components and sub-systems is becoming the order of the day, with individual small components being supplied to the system integrators instead of the vehicle manufacturers. In this process, most of the SSI units manufacturing smaller individual components are on their way to become tier 2 and tier 3 suppliers, while the larger companies including most MNCs are being transformed into tier 1 companies, which purchase from tier 2 & 3, and sell to the auto manufacturers.

# Indian auto sector needs to grow collaterally and in harmony with world industry. India has the potential to be a global automotive power. However, concerted efforts will be required to take auto manufacturing to a self-sustaining level where they shall have volumes, generate requisite technology and meet evolving emission requirements.

# Volume is important for any manufacturing enterprise. However, it is more important for automobile sector, both for the manufacture of vehicles as well as auto components. Lack of volume will not only inhibit efficient

48

manufacture but also R&D and introduction of new models. The investment and fiscal policies should create an environment for volume production and indigenous capability for innovation for small cars and auto components.

# Auto components manufacturers have been slowly gaining global recognition and maintaining a certain level of exports despite the recent downturn. It should be possible to achieve an export target of US $ 1 billion by 2005 and US $ 2.7 billion by 2010. This would require three pronged marketing strategy: exports through OEMs for their global sourcing requirements, export to tier I manufacturers as a part of their international supply chain and direct exports to aftermarket. The main challenges are lower volume – low scale, fragmentation, inadequate R&D/technology support, lower productivity levels, limited resources for international marketing and establishment of an efficient supply chain.

MEASURES TO REALIZE THE POLICY OBJECTIVES

# Initiatives relating to investment, tariffs, duties and imposts will be the instruments to achieve the Policy objectives. These path government’s economic reform and are in harmony with the commitments made to WTO.

# Increased resource allocation to the highways sector to ensure collateral upgradation and development of road infrastructure in step with the increase in the population of vehicles.

# An appropriate regulatory framework for smooth movement of traffic, safety and environmental aspects.

FOREIGN DIRECT INVESTMENT

# Automatic approval for foreign equity investment upto 100% of manufacture of automobiles and component is permitted.

49

IMPORT TARIFF

# The incidence of import tariff will be fixed in a manner so as to facilitate development of manufacturing capabilities as opposed to mere assembly without giving undue protection; ensure balanced transition to open trade; promote increased competition in the market and enlarge purchase options to the Indian customer.

# The Government will review the automotive tariff structure periodically to encourage demand, promote the growth of the industry and prevent India from becoming a dumping ground for international rejects.

# In respect of items with bound rates viz. Buses, Trucks, Tractors, CBUs and Auto components, Government will give adequate accommodation to indigenous industry to attain global standards.

# In consonance with Auto Policy objectives, in respect of unbound items i.e., Motor Cars, MUVs, Motorcycles, Mopeds, Scooters and Auto Rickshaws, the import tariff shall be so designed as to give maximum fillip to manufacturing in the country without extending undue protection to domestic industry.

# The conditions for import of new Completely Built Units (CBUs), will be as per Public Notice issued by the Director General Foreign Trade (DGFT) having regard to environment and safety regulations.

# Used vehicles imported into the country would have to meet CMVR, environmental requirements as per Public Notice issued by DGFT laying down specific standards and other criteria for such imports.

# Appropriate measures including anti dumping duties will be put in place to check dumping and unfair trade practices.

EXCISE DUTY

Motor Cars

# The ownership of cars in India is just 6 per thousand of population as against 500 in the developed economies. The contribution of the auto sector to

50

the GDP and employment is likewise low. Expansion of local demand holds great potential and is vital to install scale volumes of production.

 # Domestic demand mainly devolves around small cars not exceeding 3.80 meters in length. Small cars occupy less of road space and save on fuel. These capture more than 85% of the market. India can build export capability and become an Asian hub for export of small cars. The growth of this segment needs to be spurred.

Multi Utility Vehicles

# MUVs are an important mode of economical mass transport in rural India due to poor road infrastructure and lack of good State transport system. They are the first vehicle purchased by a number of farmers, traders, small businessmen in rural and semi-urban markets. The Government will endeavour to provide fiscal incentives to this sector.

Commercial Vehicles

# Presently excise duty on commercial vehicles sold by a manufacturer whether as a chassis or with a complete body is 16%. However, no duty is levied on the body that is built by an independent body builder on chassis bought from a manufacturer. This dispensation inveigles production of the complete trucks and buses by the chassis manufacturer and is detrimental to safety standards. The duty imposed on the construction of bodies by an independent body builder, small or organised sector, shall be equal to that of bodies built by a chassis manufacturer.

# The Government will encourage fabrication of bus body on bus chassis designed for better passenger comfort instead of truck chassis as is the current practice.

# The Government will promote the use of multi-axle vehicles for carriage of goods as they cause reduced environmental pollution and lesser wear and tear on road surface in comparison to the existing 2-axle trucks.

IMPROVING ROAD INFRASTRUCTURE

51

# Traffic on roads is growing at a rate of 7 to 10% per annum while the vehicle population growth for the past few years is of the order of 12% per annum. Poor road infrastructure and traffic congestion can be a bottleneck in the growth of vehicle industry. A balanced and coordinated approach will be undertaken for proper maintenance, upgradation and development of roads by encouraging private sector participation besides public investment and incorporating latest technologies and management practices to take care of increase in vehicular traffic.

# For the convenience of traveling public the Government shall also promote multi-modal transportation and the implementation of mass rapid transport systems.

INCENTIVE FOR RESEARCH AND DEVELOPMENT

# The Government shall promote Research & Development in automotive industry by strengthening the efforts of industry in this direction by providing suitable fiscal and financial incentives.

# The current policy allows Weighted Tax Deduction under I.T. Act, 1961 for sponsored research and in-house R&D expenditure. This will be improved further for research and development activities of vehicle and component manufacturers from the current level of 125%.

# In addition, Vehicle manufacturers will also be considered for a rebate on the applicable excise duty for every 1% of the gross turnover of the company expended during the year on Research and Development carried either in-house under a distinct dedicated entity, faculty or division within the company assessed as competent and qualified for the purpose or in any other R&D institution in the country. This would include R & D leading to adoption of low emission technologies and energy saving devices.

# Government will encourage setting up of independent auto design firms by providing them tax breaks, concessional duty on plant/equipment imports and granting automatic approval.

# Allocations to automotive cess fund created for R&D of automotive industry shall be increased and the scope of activities covered under it enlarged.

52

BUILDING BYE LAWS FOR RESIDENTIAL, COMMERCIAL AND OTHER USES

# With the growth of vehicles, smooth traffic movement has come under severe strain. The problem has been aggravated because of inadequate provision of parking facilities generally. Starting with metropolitan and important towns, the Government will pursue with State Governments and Local bodies amendments to bye laws for upward revision of the parking norms for new residential buildings, construction of common parking for existing residential areas besides parking upgradation in all commercial areas. Multi-storied parking shall also be encouraged.

ENVIRONMENTAL ASPECTS

# The automotive and oil industry have to heave together to constantly fulfill environment imperatives. The Government will continue to promote the use of low emission fuel auto technology.

# The Government after considering the recommendations of the Expert Committee on Auto Fuel Policy headed by Dr. R.A. Mashelkar, have approved a road map for implementation for the auto fuel quality consistent with the required levels of vehicular emissions norms and environmental quality. The Government will formulate a comprehensive auto fuel policy covering the other related aspects and ensure availability of appropriate auto fuel/fuel mixes at minimum social costs across the country. Suitable institutional mechanism will be put in place for certification, monitoring and enforcement of different technologies/fuel mixes. Appropriate fiscal measures will be devised to achieve milestones in the roadmap for implementation of auto fuel policy.

# In the short run, the Government will encourage the use of short chain hydrocarbons along with other auto fuels of the quality necessary to meet the vehicular emissions norms.

# There is prime need to support the development and introduction of vehicles propelled by energy sources other than hydrocarbons by promoting appropriate automotive technology. Hybrid vehicles and vehicles operating with batteries and fuel cells are alternatives to the conventional automobile,

53

which in their early beginnings, lie intreasured. As an impetus for the development of such vehicles, an appropriate long-term fiscal structure shall be put in place to facilitate their acceptance vis-à-vis vehicles based on conventional fuels.

# Internationally, the practice is to levy higher road tax on older vehicles in order to discourage their use. In India, the road tax on vehicles varies in nature and quantum among the states. Lifetime road tax is also in vogue. The endeavour will be to move to the international model.

 # In order to facilitate faster upgradation of environmental quality, the Govt. will consider having a terminal life policy for commercial vehicles alongwith incentives for replacement for such vehicles.

SAFETY

# Government will duly amend the Central Motor Vehicles Rules, Bureau of Indian Standards (BIS) and other relevant provisions and introduce safety regulations that conform to global standards.

# Testing and certification facilities need to be revised and strengthened in accordance with safety standards of global order. Government, in partnership with industry, will tend to this requirement.

HARMONISATION OF STANDARDS:

# Government recognises the need for harmonisation of standards in a global economy and will work towards it.

CORPORATE SOCIAL RESPONSIBILITY POLICY IN MARUTI COMPANY :

Corporate social responsibility (CSR) of companies has become a subject of much debate. Despite this, It had been unable to understand what exactly companies are supposed to do as their CSR. Is it philanthropy and charity? Is it social and humanitarian work or protecting the environment? Is it undertaking public service tasks which normally government should be doing? Or is it all of these? I believe that the CSR of a company should be

54

undertaking all actions as would maximise the probability of its long-term survival and sustained growth.

All companies have both direct and indirect stake holders. A company also impacts on the external environment. Direct stake holders would include all employees, suppliers and vendors, dealers, as well as share holders. Indirect stake holders would comprise communities living near the production facility, customers and others whose livelihood could be influenced by the operations of the company. The larger the company the greater would be the number of its stake holders. It is clearly in the interests of all the direct stake holders that the company should have long-term sustained growth, as closure of a company would lead to disruption in the lives of many, and often cause severe hardship to the weaker amongst stake holders, including small share holders.

The government policy to promote infrastructure and heavy industries through the public sector was to bring about economic growth with equity. The long-term survival of government companies was never an issue, as long as taxpayers - money was available to support them. In that event, the CSR of such companies should have been achieving the targets for which they were established, without incurring cost and time over runs, and expanding output to meet the needs of the economy while constantly improving productivity and quality. Companies who underperform in these respects cannot justifiably say that they are fulfilling their CSR by claiming to be model employers, or doing development work in villages or giving donations for good causes.

MARUTI COMPANY is a good example . While nationalising Sanjay Gandhi's Maruti Ltd, Parliament decided that a government company should be established to modernise the Indian automobile industry. The management of Maruti decided that this object had to receive its undivided attention. A strategy was evolved as to how this objective could be achieved within the constraints of operating as a public sector company. We recognised that the then existing systems for managing a PSU were unlikely to attain the desired results, and so drew heavily on the Japanese experience. Maruti did not follow many of the practices normally applicable to government companies as part of their `social responsibility'. The results speak for themselves.

Making profits on a sustained basis is a necessary condition for any company to survive for long. In today's globalised and increasingly competitive world, sustained profitability is not possible unless all direct stake holders recognise the changes taking place and work towards ensuring sustained profitability.

55

They have also to create a positive brand image which attracts customers to the products and services offered by the company. Following all laws and caring for the environment makes good business sense, and helps in image building. These matters have to be the core of the CSR of a company

It is apparent that it is in the interests of workers, and other direct stake holders, that the company should have longterm sustained growth. Yet, in a large number of companies this does not appear to be recognised. Workers do not think that they should help the company become more competitive. Not all vendors and dealers identify their interests with those of the company. Why do people apparently act against their longterm interests? The primary reason is lack of communication between the management of a company and the stake holders. Sometimes a company's policies are also very one-sided. Workers, usually receive politically motivated communications from outside persons, who have no stake in the future of the company, and who are looking for short-term political gains. A management needs to counter this by developing effective two-way communication to educate workers as to what is in their best interests. This education process has to be backed by policies and practices which would convince the workers that if the company does well in terms of rising productivity and profits, they too would be enabled to improve their quality of life. The workers should be able to see that management is not 'exploiting' them. This course of action was followed in Japan, and Maruti did the same. Workers shared in the gains of productivity, a large number of them became owners of houses and were respected and treated as human beings similar to management. It is believed that such worker education and its consequences are a very important element of CSR.

In manufacturing companies like Maruti , where a sizeable percentage of inputs are bought from vendors and suppliers, the ability to continuously improve quality and reduce costs is directly dependant on vendors doing the same. Just-in-time systems are only possible if vendors are totally reliable in all respects. The manufacturing company and its vendors are mutually dependant on each other for growth Share holder education is another element of CSR. They need to be educated about the benefits of financing growth from internal accruals, and how it reduces risk and increases the company's ability to tide over adverse conditions

and profitability. Maruti recognised this and gave financial, technical and management help for developing and upgrading vendors. In turn, vendors gave full support to Maruti. Both became winners, the Indian component

56

industry thrived, and the automobile industry was modernized. This was an important element of CSR

Similar principles were applied in building a sales, and after sales, network. This has become Maruti's strength for long-term sustained growth.

All companies have to ensure that their activities do not adversely affect the environment. Depletion of natural resources, like forests or ground water is a case in point. Recovery of heat or minerals from flue gases or effluents reduces pollution and the consumption of scarce resources, while saving money. Atmospheric pollution affects the health of people and so must be minimised. Laws relating to the environment should be observed both in letter and in spirit

Companies need regular availability of well educated and trained workers, engineers, management graduates and other professionals. Thus, getting involved in improving educational and training institutions, which are relevant to the company, serves both as CSR and promotes long-term business interests.

The same argument applies to programmes undertaken to improve the quality of life of people living near a production facility. A neighbourhood which values the presence of the company would obviously help in better industrial relations and give support in times of any emergency. Many actions taken by companies, like maintaining roundabouts and parks, or advertising for socially important causes help brand building. These are important for longterm business sustainability.

Promoting road safety is something Maruti believes is part of its responsibility for enabling people to make optimum use of automobiles. The running of driver training schools has been undertaken towards this end. Each company should consider how it can enhance the value of its products for society at large.

These are some of the considerations which I believe should go into devising CSR policies for companies.

57

(a)- MAIN BUSINESS

Maruti Suzuki India Ltd two manufacturing units in India one is at Gurgaon and another is at Maneshar . It has 16 Regional Offices .

Focus Area of Manufacturing :

The core focus areas of our manufacturing division are:

benchmarking ourselves against global standards to efficiently manufacture quality products; and

building a strong and motivated work force by emphasizing safety, education and continuous improvement of our manufacturing capabilities and those of our vendors.

Maruti SUZUKI INDIA Limited Gurgaon

Unit Profile

Maruti Udyog Ltd. (Maruti) was established as a Government Company in February 1981, with the objective of modernization of Indian automobile industry and production of fuel-efficient vehicles in large numbers, necessary for economic growth. Since then the Government of India in phased manner have offered its equity to SMC, Public and FIs. The new equity holding is : SMC 54.2%, Public & Financial Institutions 27.5%, Government of India 18.3%. Maruti, a socially conscious and a responsible corporate citizen, is the market leader in the domestic car market since Dec 1983. The passenger cars made in India are also exported to over 100 countries around the world. Maruti has revolutionized the Indian automobile and component industry, and has set standards in quality of products and services.

58

The existing capacity of Maruti is 6,00,000 units per year and the company employs nearly 3500 employees. Maruti produced its first vehicle in December 1983, and in a short span of 22 years produced more than 5 million vehicles. The turnover of Maruti Udyog Limited is around Rs 11000 Crore. The company has a portfolio of 11 products, including the Maruti 800, Omni, premium small car Zen, international brands Swift, Alto and Wagon-R, off-roader Gypsy, the mid sized Esteem, luxury car Baleno, Estate Altura and India's first MPV, Versa. Maruti became the first passenger Car Company in India to obtain ISO-14001 certification, in November 1999. The Maruti family comprises of:

A network of vendors for the bought out parts and consumables

A Sales & Service network comprising dealers, sales outlets, MASS (Maruti Authorized Service Stations) is spread all over the country.

A Transport network, for transporting finished vehicle to dealerships. The company is also into related service areas including pre owned cars, lease and fleet management for corporate, Auto finance and Auto insurance businesses.

Energy Consumption There has been continuous reduction in Electrical and Thermal Energy Consumption per vehicle because of implementation of various energy conservation measures.

Energy Conservation Commitment, Policy & Set up

Maruti Udyog Limited has full commitment for energy conservation. Every employee of MUL understands the importance of energy conservation and works towards it through suggestion scheme. Further exclusive budgetary provision is made for projects relating to energy conservation. The top management does monthly review of energy consumption and various issues related to energy conservation are discussed in this meeting.

59

Energy Management Policy

# Set targets for energy saving and resource conservation

# Set well laid down procedures for various functional areas for resource conservation

# Create awareness amongst employees and encourage them to give suggestions. Use QC meetings for this purpose

# Continuously monitor and give feedback on energy consumption trend

# Use of non-conventional / natural sources of energy

Our Manufacturing Facility and Process:

Our manufacturing facility comprises three integrated plants with flexible assembly lines located at Gurgaon in the northern state of Haryana. The first plant was set up in fiscal 1984 with an initial installed capacity to produce 20,000 vehicles per annum, which was augmented to 130,000 by fiscal 1991. Installed capacity was further increased with the second plant becomingoperational in fiscal 1995 to 200,000 vehicles per year. In fiscal 1996, with capacity increases in each plant, installed capacity increased to 250,000. With the third plant becoming operational in March 1999, installed capacity increased to 350,000 vehicles per year, which is the highest among passenger car manufacturers in India and among the passenger car manufacturing facilities of Suzuki’s subsidiaries outside Japan.Our facility has advanced engineering capability and is upgraded on an ongoing basis to improve productivity and quality. We have 17 manufacturing shops and are capable of producing more than 50 variants of the nine basic models manufactured, with different specifications, within thesame day. This is possible due to our information technology-enabled vehicle build sequence system and vehicle tracking system. Under the vehicle build sequence system, at the production planning stage, requirements are communicated via our intranet (internally) and our extranet (to vendors) in advance as to the time and place for delivery of components and other

60

production inputs in order to fulfill production targets. Our vehicle tracking system monitors and records the implementation of the planning during production.

Utilities:

We do not rely on outside sources of power as we have a 60-megawatt gas turbine captive power plant, which has multi-fuel capability. We also have our own reverse osmosis water treatment plant and effluent and sewage treatment plant.In 1999, we received the ISO14001 certification in respect of our environment management systems.

Our Manufacturing Paradigm:

We adopt a target control and PDCA approach as the underlying theme of all our processes. PDCA constitutes:# Planning by setting a target and time-line, dividing into action plan with value to each factor/element;# Doing the standardized operation as decided;# Checking through gap analysis to check whether the operation is really giving the desired results; and# Acting to freeze if effective or correct.

Productivity

Improving productivity is an ongoing effort in Maruti, through the Maruti production system, or MPS, which is derived from the Suzuki production system, and focuses on elimination of wasteful activities taking place during manufacturing processes. In addition to MPS activities, in-house automation, increasing utilization of production lines, outsourcing of low value-addition jobs and reduction in materials handling have contributed to improvements in the productivity of our employees and the efficiency of our operations.As shown in the table below, our employee productivity, measured as the ratio of production volume in a fiscal year to the number of our permanent employees at the end of the fiscal year,increased by approximately 79% from fiscal 1995 to fiscal 2002. In September and October 2001, 1,050 permanent employees participated in our voluntary retirement scheme, which reduced the

61

size of our workforce significantly without having a material impact on productionvolume.

Conservation of energy

We follow the three principles of “Reduce, Reuse and Recycle” for conserving energy.Between fiscal 1997 and fiscal 2003, we have reduced the consumption of electricity measured as the ratio of kilowatt hours of power consumed to the number of vehicles produced, by approximately 29%. This was achieved by using energy-saving lights and natural light, and alsothe efficient usage of other electrical appliances, thus reducing wastage. In the same period, we reduced the consumption of water, measured as the ratio of the volume of water consumed to the number of vehicles manufactured, by approximately 66%. This is achieved through the recycling of waste water in our water treatment plant and effluent and sewage treatment plant.

Quality

We produce high quality products, some of which we also export to various countries including the Netherlands, Italy, Germany, the United Kingdom and Switzerland. We were certified to ISO systems in the year 1995. ISO set in place a renewed and revised quality management system standard in the year 2000. The new ISO 9001:2000 standards are based on the eight qualitymanagement principles of customer focus, leadership, involvement of people, process approach, system approach to management, continual improvement, factual approach to decision making and mutually beneficial supplier relationships. The standard encourages the use of the PDCAapproach extensively and requires continuous improvement. We were certified with ISO 9001:2000 in 2001 and aim to achieve the TS-16949 certification. In addition, we have made the following improvements in terms of producing defect-free products:

1. DFC OK: Our Direct Final Check OK, or DFC OK percentage, which signifies the percentage of vehicles that pass through the inspection stages as defect-free, improved from approximately 77% in March 2002 to approximately 87% in March 2003.

62

2. Reduction in rejection:

Our in-process rejection cost per vehicle, computed as the ratio of (a)- the cost of components rejected due to defects arising during our

production process, to (b)- the number of vehicles sold, declined by approximately 55% from

fiscal 2002 to fiscal 2003.

3. In house warranty: Our in-house warranty costs per vehicle, computed as the ratio of

(a)-the aggregate cost of components incurred by us to service warranty claims arising from operational defects in our manufacturing lines, to

(b)- the numbers of vehicles sold in the fiscal year, declined by approximately 77% between fiscal 2002 and fiscal 2003.

Suzuki Quality Management System

Based on a method adopted by Suzuki at its manufacturing facilities, the quality of a vehicle dispatched from our facility is measured through a quality index audit on a daily basis. The quality index is a relative measure of quality based on evaluation of vehicles selected at random on a daily basis. In addition, we have recently adopted Suzuki’s global customer audit index, in order to provide a more customer-oriented focus to our entire organization, and channel resources towards customer complaints for rapid response.

Quality improvement initiatives

We have recently introduced for quality control:

# Tracking surveys and direct customer contact in order to better understand customer satisfaction levels and customers’ problems;

# Full-time task forces for improvement in initial quality study problems and departmental cross-functional teams to work on defined problems with challenging targets;

# Quality gates at various stages in order to raise alarms for correction and immediate action on defects;

63

# Fool-proofings, or Pokayoke in Japanese, which comprises checks conducted in order to prevent defects arising from human error during the manufacturing process;

# A real-time feedback system, cross-linked with overall targets; and

# The “Pica Pica” system, which aligns the sequence of components and vehicles in order to prevent incorrect fitting of components.

Kaizen

We have adopted the Japanese management concept of Kaizen, or continuous improvement. Our Kaizen activities have resulted in the improvement of our in-house capabilities. For example, we manufactured 25 multi-axis robots and 16 multi-spot welders. Group discussions among employees in different departments are conducted on a monthly basis in order to discuss and resolve problems relating to their areas of operation, an activity we refer to as quality circle activity. Based on our belief that individuals contribute to improvement in growth, we have a suggestion scheme in which we promote participation of all employees at all levels. The average number of suggestions made per employee has improved by approximately 24% in fiscal 2003, when we received more than 72,000 suggestions, as compared to fiscal 2002. Some of the other improvements as a result of the Kaizen process have been increased automation through our automated material transport system. We have also won numerous awards including the "Excellence in Suggestion Scheme" award instituted by the Indian National Saving Scheme Association regularly for each of the last four years and 15 trophies in quality circle competitions organized by the Confederation of Indian Industries.

Manufacturing Process

The production of a car at our facility occurs in the following stages:Press Shop: Our press shop has five transfer presses and two blanking lines. In the press shop,steel coils are cut to the required size and panels are prepared by pressing them between various die sets such as doors, roofs and bonnet. An anti-rust coat is applied at this stage. We also have in-house capability and the necessary technical knowledge for the design and manufacture of medium-size press dies.

64

Weld Shop: We have three welding shops with 122 six-axis robots and 25 in-house manufactured two-to-four axis robots. In this shop, various press metal components manufactured in the previous stage are spot-welded together to form the body shell. Various parts such as the floor panel, side panel, doors and bonnet are sub-assembled in this shop. Subsequently, the assembled parts undergo final welding. The welded body is sent to the paint shop through a conveyor.

Paint Shop: We have three paint shops, within one of which the final outer body is fully painted by robots. In the paint shop, the body undergoes various pre-treatment and electro deposition painting processes to provide a high corrosion resistance to the body. The car body is given an intermediate or primer coat before applying the stoving topcoat paint. The intermediate and the final coat are applied by using automatic electrostatic spray-painting machines (micro bells) and robots, followed by a baking process.

Assembly Shop: We have highly flexible assembly lines, which can simultaneously handle a large number of variants as well as adapt to sequence changes. The painted bodies proceed for final assembly in three stages. The first stage is the trim line wherein various components such as roof head lining, windshield glass and interior trim components are fitted. Thereafter, the car is transferred to an overhead conveyor, the chassis line, wherein components such as the engine, gearbox and front and rear axles are assembled on the underbody. The vehicle is then lowered to the final line on its own wheels and here components and parts such as seats, the steeringwheel and the battery are fitted. The completely assembled vehicle finally rolls out of the assembly lines to the final inspection stages.

Machine and engine shops: We assemble and test engines in our engine shops and carry out precision machining of engine components in our machine shops.

65

Licence agreements with Suzuki

Suzuki has several license agreements with us under which it has, since our inception:

• provided us with technical know-how, assistance and information for the manufacture, sale and after-sales service of our products and parts;• supplied components for our passenger cars;• deputed technical personnel to our facility;• helped us develop manufacturing processes and integrate certain Japanese management practices such as kaizen, which is Japanese for continuous improvement, in our plants;• trained our personnel; and• helped us develop and manage the supply chain for our products.

We have agreed with Suzuki that amongst other things:

• we will not manufacture in, or export products covered by agreements with Suzuki to, any territory except those permitted by Suzuki;

• we will not enter into agreements with any other manufacturer to sell any product or part that competes with any product or part covered by our license agreements with Suzuki;and.

• we will not otherwise sell, distribute or promote the sale of any product that competes with products covered by our license agreements with Suzuki.Suzuki will not be liable to us for damages arising from our use of the licensed information and disclaims responsibility for all representations and warranties made by us with respect to the licensed products.

66

(B)-ANCIALLARY BUSINESS

The Ancillary business of Maruti company is to provide after sales service related to the vehcles which are manufactured by Maruti Company. The Services which are offered by Maruti company to their customers are :

(i)-Sales of automobilesThe largest selling car from Maruti's stable, Maruti 800

In the order they were launched:

#Maruti 800: Launched 1983. Largest selling car in India, until 2004.

#Maruti Omni: Launched 1984.

#Maruti Gypsy: Launched 1985.

#Maruti 1000: Launched 1990

#Maruti Zen: Launched 1993 with a facelift in 2003.Production ended in 2006.

#Maruti Esteem:Launched 1994

#Maruti Wagon-R:Launched 1999 Modified 2006

#Maruti Baleno:Launched 1999. Production ended late 2006/early 2007.

#Maruti Alto:Launched 2000. Currently the largest selling car in India

#Maruti Grand Vitara:Launched 2003

#Maruti Grand Vitara XL-7

#Maruti Versa: Launched 2004

#Maruti Swift: Launched 2005

#Maruti Zen Estilo Launched in 2006

#Maruti Swift Diesel Launched in 2007

#Maruti Suzuki SX4 Launched in May 2007

#Maruti Grand Vitara Sports Utility Vehicle Launched in July 2007

67

(ii)-Authorized Service StationsMaruti is one of the companies in India which has unparalleled service network. To ensure the vehicles sold by them are serviced properly Maruti had 1545 listed Authorized service stations and 30 Express Service Stations on 30 highways across India.

Service is a major revenue generator of the company. Most of the service stations are managed on franchise basis, where Maruti trains the local staff. Other automobile companies have not been able to match this benchmark set by Maruti. The Express Service stations help many stranded vehicles on the highways by sending across their repair man to the vehicle.

(iii)-Maruti InsuranceLaunched in 2002 Maruti provides vehicle insurance to its customers with the help of the National Insurance Company, Bajaj Allianz, New India Assurance and Royal Sundaram. The service was set up the company with the inception of two subsidiaries Maruti Insurance Distributors Services Pvt. Ltd and Maruti Insurance Brokers Pvt. Limited

This service started as a benefit or value addition to customers and was able to ramp up easily. By December 2005 they were able to sell more than two million insurance policies since its inception.

(iv)-Maruti FinanceTo promote its bottom line growth, Maruti launched Maruti Finance in January 2002. Prior to the start of this service Maruti had started two joint ventures Citicorp Maruti and Maruti Countrywide with Citi Group and GE Countrywide respectively to assist its client in securing loan. Maruti tied up with ABN Amro Bank, HDFC Bank, ICICI Limited, Kotak Mahindra, Standard Chartered Bank, and Sundaram to start this venture including its strategic partners in car finance. Again the company entered into a strategic partnership with SBI in March 2003 Since March 2003, Maruti has sold over 12,000 vehicles through SBI-Maruti Finance. SBI-Maruti Finance is currently available in 166 cities across India.

"Maruti Finance marks the coming together of the biggest players in the car finance business. They are the benchmarks in quality and efficiency. Combined with Maruti volumes and networked dealerships, this will enable Maruti Finance to offer superior service and competitive rates in the marketplace".

68

— Jagdish Khattar, Managing director of Maruti Udyog Limited in a press conference announcing the launch of Maruti Finance on January 7, 2002.

Citicorp Maruti Finance Limited is a joint venture between Citicorp Finance India and Maruti Udyog Limited its primary business stated by the company is "hire-purchase financing of Maruti vehicles". Citi Finance India Limited is a wholly owned subsidiary of Citibank Overseas Investment Corporation, Delaware, which in turn is a 100% wholly owned subsidiary of Citibank N.A. Citi Finance India Limited holds 74% of the stake and Maruti Udyog holds the remaining 26%. GE Capital, HDFC and Maruti Udyog Limited came together in 1995 to form Maruti Countrywide. Maruti claims that its finance program offers most competitive interest rates to its customers, which are lower by 0.25% to 0.5% from the market rates.

(v)-Maruti TrueValueMaruti True Value is a service offered by Maruti Udyog to its customers. It is a market place for used Maruti Vehicles. One can buy, sell or exchange used Maruti vehicles with the help of this service in India.

(vi)-N2N Fleet ManagementN2N is the short form of End to End Fleet Management and provides lease and fleet management solution to corporates. Its impressive list of clients who have signed up of this service include Gas Authority of India Ltd, DuPont, Reckitt Benckiser, Sona Steering, Doordarshan, Singer India, National Stock Exchange and Transworld. This fleet management service include end-to-end solutions across the vehicle's life, which includes Leasing, Maintenance, Convenience services and Remarketing.

(vii)-AccessoriesMany of the auto component companies other than Maruti Udyog started to offer components and accessories that were compatible. This caused a serious threat and loss of revenue to Maruti. Maruti started a new initiative under the brand name Maruti Genuine Accessories to offer accessories like alloy wheels, body cover, carpets, door visors, fog lamps, stereo systems, seat

69

covers and other car care products. These products are sold through dealer outlets and authorized service stations throughout India.

(viii)-Maruti Driving SchoolAs part of its corporate social responsibility Maruti Udyog launched the Maruti Driving School in Delhi. Later the services were extended to other cities of India as well. These schools are modelled on international standards, where learners go through classroom and practical sessions. Many international practices like road behaviour and attitudes are also taught in these schools. Before driving actual vehicles participants are trained on simulators.

"We are very concerned about mounting deaths on Indian roads. These can be brought down if government, industry and the voluntary sector work together in an integrated manner. But we felt that Maruti should first do something in this regard and hence this initiative of Maruti Driving Schools."

— Jagdish Khattar, at the launch ceremony of Maruti Driving School, Bangalore

(ix)-ExportsMaruti Exports Limited is the subsidiary of Maruti Udyog Limited with its major focus on exports and it does not operate in the domestic Indian market. The first commercial consignment of 480 cars were sent to Hungary. By sending a consignment of 571 cars to the same country Maruti crossed the benchmark of 3,00,000 cars. Since its inception export was one of the aspects government was keen to encourage. Every political party expected Maruti to earn foreign currency.

Angola, Benin, Djibouti, Ethiopia, Europe, Kenya, Morocco, Sri Lanka, Uganda, Chile, Guatemala, Costa Rica and El Salvador are some of the markets served by Maruti Exports .

70

COMPETITORS

71

CHAPTER - 3 COMPETITORS

(a) - TATA COMPANY

COMPANY OVERVIEW

Tata Motors is one of the leading automotive vehicle manufacturing companies in India.The company belongs to Tata Group, one of the leading business groups in India. The company’s automobile products include all types of commercial and passenger vehicles, including financing of the vehicles sold by the company. The company primarily operates in Europe, Africa, the Middle East, Australia,South East Asia and South Asia. It is headquartered in Mumbai, India and employs about 33,500 people.The company recorded revenues of INR277,804.3 million (approximately $6,397.8 million) during the fiscal year ended March 2007, an increase of 32.7% over 2006. The operating profit of the company was INR35,589.1 million (approximately $819.6 million) during fiscal year 2007, an increase of 24.2% over 2006. The net profit was INR26,902.2 million (approximately $619.6 million) in fiscal year 2007, an increase of 28.4% over 2006.

KEY FACTS

Head Office Tata Motors LimitedBombay House,24 Homi Mody StreetMumbai 400 001,Maharashtra,INDPhone 91 22 5665 8282Fax 91 22 5665 7799

Web Address http://www.tatamotors.comRevenue / turnover 277,804.3

72

(INR Mn)Financial Year End MarchEmployees 33,536New York Ticker TTMBombay Ticker 500570

BUSINESS DESCRIPTION

Tata Motors, formerly known as Tata Engineering & Locomotive Company (TELCO) is one of the leading automobile manufacturer in India with a portfolio that includes trucks, buses, utility vehicles and passenger cars. The company belongs to Tata Group, one of the leading business groups in India. It has assembly operations in Malaysia, Kenya, Bangladesh, Spain, Ukraine, Russia andSenegal.The company operates with a single business segment: automotive.Under the automotive business segment the company designs, manufactures, assembles, sells and services commercial and passenger vehicles, spare parts, components and accessories. Additionally the company provides financing for all its vehicles.The company’s other services primarily include information technology, services, construction equipment manufacturing, machine tools and factory automation solutions. It also offers high-precision tooling and plastic and electronic components for automotive and computer applications and investment businesses.The company provides information technology services through the subsidiary Tata Technologies(TTL). TTL provides technology services, product lifecycle management, engineering and design services. TTL operates through companies, INCAT and Tata Technologies iKS. Additionally TTL provides specialized Engineering & Design Services (E&D), Product Lifecycle Management (PLM)and product centric IT services to manufacturers. It conducts operations through its 17 subsidiary companies in 45 cities across 12 countries, and through its offshore development centers in India and Thailand. Its customers include automotive, aerospace and consumer durable manufacturers.The construction equipment operates through its subsidiary Telco Construction Equipment Company(Telcon).Telco is engaged in the business of manufacturing and sale of construction equipment and allied services.Tata Motors’ operates with 40 subsidiary companies and 19 affiliates. Some of its subsidiaries includeTata Daewoo Commercial Vehicle Company, manufactures and sells heavy commercial vehicles;Tata AutoComp Systems

73

(TACO), promotes foreign joint ventures in automotive components and systems and is also engaged in engineering services, supply chain management and after-market operations; TML Financial Services, is a non-banking finance company which supports vehicle financing activities and other related activities; and Tata Motors Insurance Services (TMISL).Its manufacturing plants in India are located at Jamshedpur in the East, Pune in the West and Lucknow in the North. The company’s sales and distribution network in India comprises 720 dealer outlets which are supported through eight regional offices, 28 regional sales offices and 38 sub-regional offices. It has presence at over 2,000 locations in India, including after sales and vehicle servicing outlets.

HISTORY

Tata Motors was established in 1945 by Tata group initially as Tata Locomotive and Engineering Company to manufacture steam locomotives. In 1954, the company entered into collaboration with Daimler Benz of Germany to manufacture commercial vehicles. The company's research and development centre was set up at Jamshedpur in 1959.The company changed its name to Tata Engineering and Locomotive Company (TELCO) in 1960.The collaboration with Daimler Benz was ended in 1969. It started manufacturing heavy commercial vehicles in 1983. Tatamobile 206 3rd LCV model was introduced by the company in 1989.The company launched its first passenger car, Tata Siera in 1991 and in the same year the TAC 20 crane was launched. The following year, it launched Tata Estate. Two years later, a joint ventureagreement was signed with Cummins Engine to manufacture high horsepower and emission friendly diesel engines. Tata Sumo, a multi utility vehicle and Tata Safari, a sports utility vehicle and TataIndica, a passenger car were launched in 1996 and 1998 respectively.In 2000, company launched CNG buses. The following year, Tata Engineering and PSA Peugeot Citroen agreed to work together to jointly develop a car on a PSA Peugeot Citroen platform for manufacture by Tata Engineering for the Indian market as part of its passenger car business. In the same year, the company launched Indica V2, Indica V2 Petrol, CNG Indica and Tata Safari EX.An agreement was made with Jardine Motors to acquire its 50% stake in Concorde Motors (CML)in 2002. In the same year, the company launched EX series in commercial vehicles, Tata 207 DI,Tata Sumo'+' Series, 2003 SAFARI range and Tata Indigo. Later ion that year, the company entered a

74

product agreement with MG Rover of the UK. Later in that year, Tata Group entered an agreement with Jardine Motors to acquire its 50% stake in Concorde Motors Limited (CML). CML is a joint venture of the Tata Group and Jardine Motors, in which each of the partners holds 50% of the equity and represents Tata Engineering's passenger vehicles.In 2003, the company and Phoenix Venture Holdings (PVH) entered an agreement with Tata Engineering to distribute the company's Safari off-roader and Loadbeta pick-up trucks in the UK and Irish markets. Later in that year, the company was renamed to Tata Motors and launched the power packed 135 PS Safari (EXi) petrol.The company introduced the new Indica V2 and Tata LPT 909EX Turbo truck in 2004. In the same year Daewoo Commercial Vehicle was acquired by the company. Later in that year, Tata Daewoo Commercial Vehicle Company launched next generation truck 'NOVUS'.The same year the company was listed on the New York Stock Exchange (NYSE) and two more cars, Indigo Marina and Sumo Victa, were launched.In early 2005, Tata Finance was merged with Tata Motors and it received an order for 1070 bus chassis from various state transport corporations in Karnataka. In the same year, the company acquired a 21% equity stake in the Spanish bus body building company, Hispano Carrocera. Branded buses and coaches, Starbus and Globus, Tata Ace- a mini truck, Safari Dicor, Indica V2 Turbo Diesel car, Tata Novus truck and Tata TL 4X4-sports utility vehicle were launched in 2005.During the same year, Tata Motors inaugurated a new factory for manufacturing heavy commercial vehicles in Jamshedpur. Later in that year, the company, Hitachi Construction Machinery Company (HCM) and Telco Construction Equipment Company (Telcon), an 80:20 joint venture company between Tata Motors and HCM, signed an agreement, to expand their scope of cooperation and partnership with HCM increasing its stake in Telcon from 20% to 40%.In the same year, Tata Daewoo Commercial Vehicle Company (TDCV) signed an agreement with Afzal Motors of Pakistan in Karachi for the assembly of TDCV vehicles in Pakistan.In 2006, the company launched Indica V2 Xeta. In the same year, Tata Motors and Marcopolo,Brazil, entered a joint venture to manufacture fully built buses and coaches for India and markets abroad. The company launched mini truck 'Tata ACE' in Sri Lanka in May 2006.The company introduced new range of its premium SUV brand, the Tata Safari in June 2006. Tata Motors launched Indigo and Indigo Marina range in September 2006.In December 2006, the company and Thonburi Automotive Assembly Plant Company (Thonburi),the Thailand-based independent assembler of automobiles, entered a joint venture in Thailand to

75

manufacture, assemble and market pickup trucks. In the same month, the company and Fiat Group entered three additional cooperation agreements also the company introduced a new Indigo range.Tata Motors launched the longwheel base Indigo XL and a new 2007 Indica V2 range launched in January 2007. In February 2007, Iveco, a company of Fiat Group, and Tata Motors signed a Memorandum of Understanding (MoU) to analyse the feasibility of cooperation, across markets, in the area of commercial vehicles.In April 2007, the company launched new Fiat Palio Stile in two petrol engine options: Palio Stile1.1 (in three versions- SL, SLE, SLX) and Palio Stile 1.6 (Sport). In the same month, the company launched mini truck ‘Tata ACE’ in Nepal.The company introduced Magic & Winger, to create new segments in urban and rural passenger transportation in June 2007.

KEY EMPLOYEE BIOGRAPHIES

Ravi Kant

Board: Executive BoardJob Title: Managing DirectorSince: 2005

Mr. Kant has been Managing Director of Tata Motors since 2005. He serves as of the company Executive Director (Commercial Vehicle Business Unit) since 2000. Prior to joining the company,he worked with Philips India as Director of Consumers Electronics Business and prior to that he worked with LML as Senior Executive Director (Marketing) and Titan Watches as Vice President(Sales & Marketing). He was also employed with Kinetic Engineering, Hindustan Aluminum Company and Hawkins Cookers. He holds a Bachelor of Technology degree from the IIT, Kharagpur and aMasters in Science in management techniques from Aston University, Birmingham, UK.

Praveen P Kadle

Board: Executive BoardJob Title: Executive Director, Finance and Corporate AffairsSince: 2001

76

Mr. Kadle has been Executive Director, Finance and Corporate Affairs of Tata Motors since 2001.Prior to joining the company, he worked as Chief Financial Officer of Tata IBM. He is an Honors Graduate in Commerce and Accountancy from Mumbai University and also a member of the Institute of Chartered Accountants of India, the Institute of Cost and Works Accountants of India and the Institute of Company Secretaries of India.

P M Telang

Board: Executive BoardJob Title: Executive Director, Commercial VehiclesSince: 2007

Mr. Telang has been Executive Director, Commercial Vehicles of Tata Motors since 2007. He has over three decades of functional expertise in the automotive industry and machinery manufacturing.He served first three years of his career with M/s Larsen & Toubro, he joined the House of Tatas through the prestigious TAS (Tata Administrative Service) cadre. He holds a Bachelor's Degree in Mechanical Engineering and is an MBA from IIM, Ahmedabad.

Ratan N Tata Board: Non Executive BoardJob Title: Chairman

Mr. Tata serves as Chairman of Tata Motors. He joined Tata Group in 1962 and is the Chairman of the Tata group of companies and Tata Sons, the holding company for the majority of the Tata group of companies. He has been on company's board since 1981 and has spent more than 13 years in an executive capacity and is actively involved with product development and other business strategies of the company. He holds a B Sc (Architecture) degree from Cornell University, US and has completed the Advanced Management Program at Harvard University, US.

N A Soonawala

Board: Non Executive BoardJob Title: Director

77

Since: 1989

Mr. Soonawala has been Director of Tata Motors since 1989. He joined Tata Sons in 1968. He previously worked with ICICI, Washington. He is a Commerce Graduate from the University of Bombay and a Chartered Accountant from the Institute of Chartered Accountants of India.

J J Irani

Board: Non Executive BoardJob Title: DirectorSince: 1993

Mr. Irani has been Director of Tata Motors since 1993. He also serves on the boards of various Tata companies. He holds a B Sc degree from Science College, Nagpur in 1956 and a M Sc (Geology)degree from the Nagpur University in 1958. He also obtained M Met and Ph D degrees from the University of Sheffield, UK, in 1960 and 1963 respectively.

V R Mehta

Board: Non Executive BoardJob Title: DirectorSince: 2005

Mr. Mehta has been Director of Tata Motors since 2005. He was the founder Managing Director of the Dredging Corporation of India. Earlier he worked as a senior expert for the Asian Development Bank and held a senior level position with the Indian federal Ministries of Railways, Shipping and Transport. He holds a Bachelor of Engineering (Honors) degree from the University of Rajasthan.

R Gopalakrishnan

Board: Non Executive Board

Job Title: DirectorSince: 1998

Mr. Gopalakrishnan has been a Director of Tata Motors since 1998. He is also an Executive Director of Tata Sons and a member of the Group Executive

78

Office of Tata Sons, besides being on the boards of various Tata companies. Prior to joining the Tata group in August 1998, he was Vice Chairman of Hindustan Lever. He holds a Bachelor's degree in Science and a B Tech (Electronics) degree from the Indian Institute of Technology (IIT), Kharagpur.

Nusli N Wadia

Board: Non Executive BoardJob Title: DirectorSince: 1998

Mr.Wadia has been a Director of Tata Motors since 1998. He serves as Chairman of Bombay Dyeing & Manufacturing Company and heads the Wadia group. He is also the Chairman/Trustee of various charitable institutions and non-profit organizations.

S M Palia

Board: Non Executive BoardJob Title: DirectorSince: 2006

Mr. Palia has been Director of Tata Motors since 2006. He was Managing Director of Kerala Industrial and Technical Consultancy Organisation. He also serves on the Boards of various companies in the industrial and financial service sectors and is also actively involved as a trustee in various NGOs and Trusts. He served as IDBI from 1964 to 1989 during which period he held various responsible positions including that of an Executive Director. He has also acted as an advisor to Industrial Bank of Yeman, Saana (North Yeman) and Industrial Bank of Sudan, Khartoum (Sudan) under World Bank Assistance programmes. He is a B Com, L L B, CAIIB and AIB (London) is a Development Banker by profession.

MAJOR PRODUCTS AND SERVICES

Tata Motors is an automotive vehicle manufacturing company in India. The company's key products

79

and services include the following:

Passenger cars:

Indica V2Indica V2 TurboIndica V2 XetaFiat carsIndigo V seriesIndigo XLThe New IndigoThe New Indigo Marina

Utility vehicles:

Safari DicorSumo

Trucks:

# Medium and heavy commercial vehicles: Tata Novus TL 4x4

# Intermediate commercial vehicles: LPT 1109 Turbo Truck LP 1109 Turbo Truck

# Light commercial vehicles: TATA 407 TATA SFC 407EX TATA 207 DI TATA ACE (BS II & III) Small commercial vehicles

Buses:

Starbus Globus

MagicWinger

80

Others

Defense vehiclesEngines, spare parts and other productsConstruction equipmentsAuto componentsInformation Technology servicesSale and distribution of vehicles

Head Office

Tata Motors LimitedBombay House24 Homi Mody StreetMumbai 400 001MaharashtraINDP:91 22 5665 8282F:91 22 5665 7799http://www.tatamotors.com

(b)- Honda Motor Company Limit

COMPANY OVERVIEW

Honda Motor Company is one of the largest vehicle manufacturers in the world. With a global network of 437 subsidiaries, Honda develops, manufactures and markets motorcycles, automobiles and power products. The company has global operations. It is headquartered in Tokyo, Japan and employs 167,231 people.The company recorded revenues of JPY11,087.1 billion (approximately $94 billion) during the fiscalyear ended March 2007,

81

an increase of 11.9% over 2006. The operating profit of the company was JPY851.9 billion (approximately $7.2 billion) during fiscal year 2007, a decrease of 2% over 2006.The net profit was JPY592.3 billion (approximately $5 billion) in fiscal year 2007, a decrease of 0.8% over 2006.

Head Office

Honda Motor Company Limited1 1 Minami Aoyama 2 ChomeMinato-kuTokyo 107 8556JPNPhone 81 3 3423 1111Fax 81 3 5412 1515Web Address http://world.honda.comRevenue / turnover 1.1(JPY Mn)Financial Year End MarchEmployees 167,231New York Ticker HMCTokyo Ticker 7267

BUSINESS DESCRIPTION

Honda Motor Company (Honda) is one of the leading manufacturers of automobiles and the largest manufacturer of motorcycles in the world. Additionally, the company also provides a range of financial services to its customers and dealers. Honda also manufactures and markets power products. The company has over 120 manufacturing facilities in 30 countries worldwide.The company operates through four business segments: the automobile business, motorcyclebusiness, financial services, and power products and other businesses.The automobiles business manufactures passenger cars, multi-wagons, minivans, sport utility vehicle,sports coupe and mini vehicles. The company’s passenger car brands include Legend, Accord,Civic, City, Acura RL, Acura TL and Acura TSX. In the multi-wagons, minivans, sport utility vehicle and sports coupe segments, major brands include: Elysion, Odyssey, Step Wagon, Edix, FR-V,Stream, Fit, Jazz, Airwave, Pilot, Ridgeline, Element, CR-V, Acura MDX, Acura RSX.Honda manufactures its automobiles at two sites in Japan:

82

the Saitama factory and the Suzuka factory.The company’s other major production sites are located in the US (Ohio, Alabama), Canada(Alliston), UK (Swindon) and Thailand (Ayutthaya). The manufacture of the Life, Vamos and Vamos-Hobio, Zest, Acty-Truck and Acty-Van, is undertaken by Yachiyo Industry, one of thecompany’s affiliates.The motorcycle business produces a range of motorcycles, from the 50cc class to the 1800cc class in cylinder displacement. Honda’s motorcycles use gasoline engines developed by Honda that are air or water cooled; two or four cycled; and single, two, four or six cylinder. Honda’s motorcycle line consists of scooters, electric-motor-assisted bicycles, sports bikes and large touring cycles.Honda’s motorcycles are produced at two sites in Japan: Hamamatsu and Kumamoto. Honda’s motorcycles are also produced by the company subsidiaries in the US, Italy, Spain, Brazil, Thailand,Vietnam, Philippine and India. In addition, Honda has a 26% stake in Hero Honda Motors, one of the leading two wheeler manufacturers in India. In Japan, motorcycles are distributed through approximately 7,700 outlets, including approximately 1,000 PROS authorized dealerships. PROS dealerships sell substantially all of Honda’s Japanese motorcycle models.The financial services business offers a range of financial services to customers and dealers through financial subsidiaries in Japan and around the world.Honda’s power products and other businesses segment manufactures a variety of power products including power tillers, portable generators, general purpose engines, grass cutters, outboard engines,water pumps, snow throwers, power carriers, power sprayers, lawn mowers and lawn tractors (riding lawn mowers). The company also makes engines for light business jets as well as automobile fuelcells. Honda also manufactures humanoid robots under the brand name, ASIMO.Approximately 96% of Honda’s overseas sales are made through its principal foreign salessubsidiaries, which distribute Honda’s products to local wholesalers and retail dealers. In the US, which is the largest market for Honda, the company markets its products through a sales network of approximately 1,288 independent local dealers for automobiles, approximately 1,250 for motorcycles and approximately 5,700 for power products. Many of the motorcycle dealers and some of the automobile dealers also sell Honda’s power products. The company’s Acura network in the US (about 268 dealerships) offers the RL, TL, TSX, MDX, RSX and CSX (Canada only) models.Honda also exports North American-built models as the Accord, Civic, TL, Odyssey, Pilot, Ridgeline,Element, and MDX to other markets. In fiscal 2007, Honda exported approximately 35,074 units from North America to 37 countries throughout the world.

83

In Europe, Honda’s products are distributed in the UK, Germany, France, Belgium, the Netherlands,Spain, Switzerland, Austria, Italy and other European countries through approximately 1,800 independent local dealers for automobiles, approximately 1,950 for motorcycles and approximately 7,400 for power products.Honda exports various components for its products, where manufacturing is carried out by its subsidiaries, joint venture firms and licensees. The company exports motorcycle components to 14 countries, including Indonesia, Thailand, India, Brazil and China; automobile components to 14 countries, including the US, Canada, China, Thailand and Brazil; and power product componentsto eight countries, including the US, Thailand, Italy, China, France, India and Australia.

HISTORY

Honda Motor Company (Honda) was established in 1946 by Soichiro Honda. In 1946, Honda Technical Research Institute, Honda’s predecessor, manufactured motors for motorized bicycles.The company manufactured its first product, the A-type bicycle engine, in 1947. Honda was incorporated in 1948, under the commercial code of Japan as Honda Giken Kogyo Kabushiki Kaisha.During the 1950s, Honda became one of the leading motorcycle manufacturers in the world.The company began developing original machines to process cylinder heads and crankcases in1956. Honda's American operations were established in Los Angeles in 1959. In 1960, the company spun off the Honda research and development (R&D) Center into an independent entity. In 1963,Honda launched its first sports car in Japan. In the following year, the company entered the Formula One auto racing for the first time, and began producing automobiles at its Saitama factory in Japan,in the same year. Honda began producing automobiles at its Suzuka factory in 1967. In 1969, it established its Canadian subsidiary to market motorcycles.The company established a manufacturing plant in the US in 1980. During 1984, the company opened a new office complex in British Columbia. Honda also began assembling power equipment at its Hamamatsu factory in Japan, during 1984. Honda established Honda Canada Finance in 1987,to provide financing to its consumers and dealers.Honda also launched its first gasoline-electric hybrid vehicle in Canada during 2000. In the same year, Honda established an Indonesian subsidiary for manufacturing power products.Honda began producing two-wheelers in India through its subsidiary, Honda Motorcycle & Scooter India, in 2001. In Korea, it established a subsidiary for wholesale and retail sale of motorcycles,

84

while the company's joint venture in China, Sundiro Honda Motorcycle, began production of motorcycles. In the following year, Honda set up an automobile plant in Indonesia. Honda and General Electric announced a strategic alliance to produce a new jet engine for light business jets in 2004. In Russia, Honda Motor established a subsidiary to strengthen its local motorcycle, automobile and power product sales operations. Dongfeng Honda Automobile, one of Honda's joint venture companies in China, began producing CR-V sport utility vehicle in Wuhan,Hubei Province. In Korea, the company's subsidiary began importing and selling automobiles in Korea. In the US, the company established a new subsidiary, to focus on the aviation engine business. Honda allied with FuelMaker to develop natural gas vehicle home refueling technology.Honda entered into a 10-year business alliance with Disneyland resort in 2005, wherein the company would sponsor the theme park's anniversary festivities and would exhibit its advanced humanoid robot, ASIMO. Honda Vietnam, Honda's motorcycle production and sales joint venture in Vietnam,was granted an additional license to build an automobile plant in Vietnam, in the same year.Honda also acquired the shares it did not already own in BARH, the holding company which runs the BAR Honda F1 team, during 2005. Earlier, Honda held a stake of 45% in BARH. From the 2006 season, Honda would field its own team in the Formula One World Championship Series.Honda announced plans to build a new plant in western Japan during 2006 to produce key components for hybrid cars. In the US, Honda announced its intention to build an automobile assembly plant near Greensburg, Indiana. This plant is likely to produce 200,000 vehicles a year.The company further strengthened its presence in Ukraine by establishing a fully-owned subsidiary.In March 2006, Honda Power Equipment completed its newly enhanced interactive eStore, enabling the online purchase of an even wider array of products.Later in June 2006, Honda R&D Japan has developed the world's first Electric Power Steering (EPS) system for All Terrain Vehicles (ATVs). This newly developed system monitors steering torque and vehicle speed to adjust the levels of steering assist and feel.In the August 2006, Honda established a wholly-owned subsidiary, named Honda Aircraft Company,which would be responsible for the further development, sales promotion and production of the innovative HondaJet. The new company would be based in a facility at the Piedmont Triad International Airport in Greensboro, North Carolina, where the prototype HondaJet was assembled and flight tests have been carried out for more than 3 years.

85

In October 2006, Honda Motor announced the availability of the 2007 Honda Civic GX for the New York State market.The Civic GX would be on sale at five Honda dealers on Long Island and fourteen additional dealers throughout the state, marking the first time the Civic GX is available for retail sale outside of California. The Civic GX Later in December 2006, Honda R&D Americas opened new Advanced Design Studio. The new studio, located in the Old Town area of Pasadena, was the company's third design center in California.In February 2007, Honda Aircraft Company, announced plans to establish its world headquarters in Greensboro, North Carolina, with construction of a new 215,000 square foot headquarters facility and hangar at Piedmont Triad International (PTI) airport. The company also confirmed plans to manufacture its advanced light jet, HondaJet, at a new plant to be constructed adjacent to its new headquarters.Later in March 2007, Honda announced agreements with GKN Aerospace - Alabama, Avcorp Industries and Garmin International as major component suppliers for the HondaJet advanced light jet, to be produced at its plant in Greensboro, North Carolina. In the same month Honda announced plans for its $550 million automobile plant, to be known as Honda Manufacturing of Indiana.In May 2007, Honda opened an Environmental Learning Center (ELC) in Irving, Texas, the company's third such facility in the country. In July 2007, Honda invested $27 million in a North Carolina plant to build engines for small business jets. In the same month Honda announced plans to boost its production capacity around the world from 3.9 million to 4.7 million vehicles by 2010.

KEY EMPLOYEE BIOGRAPHIES

Takeo Fukui

Board: Executive BoardJob Title: PresidentAge: 62

Mr. Fukui currently serves as President and Chief Executive Officer of Honda. He joined the Company in 1969. His previous titles include Senior

86

Director Development, Manager of Hamamatsu Production Office, Managing Director and Senior Managing Director. He was previously serving as President and Director of a few subsidiaries.

Satoshi Aoki

Board: Executive BoardJob Title: ChairmanSince: 2007Age: 60

Mr. Aoki has been serving as Chairman of the Board and Representative Director of Honda Motor since 2007. He joined the Company in April 1969. His previous titles include Director of Finance in Business Administration Main Unit, Director of Accounting in Business Administration Main Unit,Chief Director of Business Administration, Managing Director, Senior Managing Director, Compliance Officer, Vice President and Director.

Koichi Kondo

Board: Executive BoardJob Title: Executive Vice President and Chief Operating Officer for Regional Sales Operations(Japan) and Chief Operating Officer for Regional Sales Operations (Japan) Chairman and Directorof American Honda MotorSince: 2007Age: 60

Mr. Kondo has been serving as Executive Vice President and Chief Operating Officer for Regional Sales Operations (Japan) and Chief Operating Officer for Regional Sales Operations (Japan) Chairman and Director of American Honda Motor of Honda Motor since 2007. He joined the Company in 1970. His previous titles include Chief Director of South America, Managing Director, Chief Director of North America Region, Senior Managing Director and Director. He used to be President and Director of a few subsidiaries.

Minoru Harada

87

Board: Executive BoardJob Title: Chief Operating Officer for Motorcycle Operations Purchasing Operations SupportSince: 2006Age: 60

Mr. Harada has been serving as Chief Operating Officer for Motorcycle Operations Purchasing Operations Support Officer and General Supervisor, Information Systems of Honda Motor since 2006. He joined the Company in 1969. His previous titles include Chief Director of Four-wheel Overseas Region, Director of Asia and Oceania in Asia and Oceania Main Unit, Director, Director of Four-wheel Asia and Oceania, Managing Director, Chief Director of Multi-purpose Business, Chief Director of European Region and Senior Managing Director. Mr. Harada used to be President and Director of a subsidiary, Honda Motor Europe.

Masaaki Kato

Board: Executive BoardJob Title: General Supervisor, Quality President and Director of Honda R&DSince: 2007Age: 57

Mr. Kato has been serving as General Supervisor, Quality President and Director of Honda R&D President and Director of Asian Honda Motor since June 2007. His previous titles include Director of Human Resources in Administration Main Unit, Manager of Human Resources Development Office in Administration Main Unit, Managing Executive Officer and Director. Mr. Kato used to serve as President and Director of two subsidiaries, Honda Manufacturing of Alabama and Honda of the UK Manufacturing.

Atsuyoshi Hyogo

Board: Executive BoardJob Title: Chief Operating Officer for Regional Operations (China) President of Honda Motor (China)Investment CorporationSince: 2005

88

Age: 58

Mr. Hyogo has been serving as Chief Operating Officer for Regional Operations (China), President of Honda Motor (China) Investment Corporation since 2005. He joined the Company in 1972. His previous titles include Managing Director and Director. He used to be President and Director of two subsidiaries. He is also General Manager of a subsidiary in China.

Satoshi ToshidaBoard: Executive Board

Job Title: Chief Operating Officer for Power Product OperationsSince: 2006Age: 60

Mr. Toshida has been serving as Chief Operating Officer for Power Product Operations of Honda Motor since 2006. He joined the Company in 1973. His previous titles include Director of Two-wheel Asia and Oceania in Asia and Oceania Main Unit, Deputy Chief Director of Asia and Oceania,Managing Director, Chief Director of Asia and Oceania and Director. He used to be President and Director of a few subsidiaries.

Koki Hirashima

Board: Executive BoardJob Title: Chief Operating Officer for Production Operations, Risk Management Officer and GeneralSupervisor, Information SystemsSince: 2005Age: 59

Mr. Hirashima has been serving as Chief Operating Officer for Production Operations, Risk Management Officer and General Supervisor, Information Systems of Honda Motor since 2005. He joined the Company in 1969. His previous titles include Managing Director and Director. He used to be Vice President and Director of a subsidiary.

Mikio Yoshimi

89

Board: Executive BoardJob Title: Chief Operating Officer for Business Support Operations Chief Officer of Driving SafetyPromotion Center Compliance Officer Government & Industrial AffairsSince: 2006Age: 59

Mr.Yoshimi has been serving as Chief Operating Officer for Business Support Operations Chief Officer of Driving Safety Promotion Center Compliance Officer Government & Industrial Affairs of Honda Motor Since 2006. He is also in charge of public relation. He joined the Company in 1970.He was previously serving as Managing Director. He used to be Vice President and Director of a subsidiary.

Toru Onda

Board: Executive BoardJob Title: Chief Operating Officer for Purchasing OperationsSince: 2002Age: 58

Mr. Onda has been serving as Managing Director and Chief Director of Purchasing of Honda Motor since 2002. He joined the Company in 1977. His previous titles include Director of 1st Four-Wheel Purchasing in Purchasing Main Unit and Director.

MAJOR PRODUCTS AND SERVICES

Honda Motor Company is one of the largest manufacturers of automobiles in the world.The company's key products and services include the following:

Automobiles:

90

Passenger carsSports utility vehiclesMinivansMini-vehiclesMulti-wagons

Motorcycles:

ScootersElectric-motor-assisted bicyclesSports bikesLarge touring cycles

Power equipment:

Power unitsGeneratorsLawn MoversTillersSnow throwersWater pumpsMarine EnginesElectric wheelchairs

Technology products:

Aircraft enginesFuel CellASIMO

Brands:

Passenger cars:LegendAccord

Civic

City

91

Acura RLAcura TLAcura TSXElysionOdysseyStep WagonEdixFR VStreamFitJazzAirwavePilotRidgelineElementCR VAcura MDXAcura RSX

Head Office

Honda Motor Company Limited1 1 Minami Aoyama 2 ChomeMinato-kuTokyo 107 8556JPNP:81 3 3423 1111F:81 3 5412 1515

http://world.honda.com

(c)--Hyundai Motor Co.

COMPANY OVERVIEW

92

Hyundai Motor Company is a leading automobile manufacturer. The company specializes in the production of automobiles, including passenger cars, minibuses and trucks. In addition, the company manufactures gasoline, diesel and industrial engines. It has manufacturing presence in the US,China, India, and Europe. The company is headquartered in Seoul, South Korea and employees about 54,700 people.The company recorded revenues of KRW63,648,025 million (approximately $69,440 million) during the fiscal year ended December 2006, an increase of 8.2% over 2005. The operating profit of the company was KRW1,796,690 million (approximately $1,960.2 million) during fiscal year 2006, a decrease of 21.7% over 2005. The net profit was KRW1,259,247 million (approximately $1,373.8 million) in fiscal year 2006, a decrease of 48.5% compared to 2005.

KEY FACTS

Head Office Hyundai Motor Co.231 Yangjae-dongSeocho-guSeoul 137 938KORPhone 82 2 3464 1114Fax 82 2 3463 3484Web Address http://www.hyundai-motor.comRevenue / turnover 6.3(KRW Mn)Financial Year End DecemberEmployees 54,711Seoul Ticker 05380

BUSINESS DESCRIPTION

Hyundai Motor is an automobile manufacturer in Korea. The company is engaged in the design,development and manufacturing of automobiles. The company is part of the Hyundai Group, which includes companies with a diverse market range including electronics, finance, shipping and shipbuilding. It operates in Korea, North America, Europe and Asia. Hyundai

93

has a sales network extending 193 countries.The company divides its business into two segments: non financial industry; and financial industry.The non financial industry segment includes the design, development and manufacturing ofautomobiles.The company divides its automobiles into three categories including passenger vehicles;recreational vehicles; and commercial vehicles. Toyota’s product line-up includes subcompact and compact cars, mini-vehicles, mid-size, luxury, sports and specialty cars, recreational and sport-utility vehicles, pickup trucks, minivans, trucks and buses. The company sells its passenger cars through Autosprime, Gets, Elantra, Hyundai Coupe, Sonata, Grandeur, Centennial, and Santro. The recreational vehicles of the company are marketed by Veracraz, Terracan, Santa Fe, Tucson, H1,Trajet, and Matrix.The commercial vehicles of the company including pickup trucks, minivans, trucks and buses are marketed through Hyundai HD, County, Aero town, Super Aero city, Aero, and Universe.

During 2006, Hyundai Motor recorded domestic sales of 580,000 vehicles, 1,031,000 units in exports while 886,000 units were sold from overseas manufacturing plants with sales totaling 2,497,000 units.The Company owns and operates three principal automobile production bases in Korea: the Ulsan factory, the Asan factory and the Jeonju factory. In addition, the company has invested in three overseas manufacturing plants including Hyundai Motor Manufacturing Alabama (HMMA) as well as nine overseas sales and R&D subsidiaries including Hyundai Motor America (HMA).Its Ulsan factory produces luxury cars, mini vans and sports utility vehicle (SUV). Its Jeonju plant in Korea is capable of producing 100,000 commercial vehicles annually and is home to all of Hyundai's mid and large size bus and truck production. The company also maintains production facilities in the US and emerging markets like China, India and Turkey.Hyundai has research development centers in the US, Europe, Korea and Japan focusing on developing technologies related to recycling, exhaust emission reduction, fuel efficiency improvement,and environment friendly vehicles.Hyundai financial services business provides financing to dealers and their customers for the purchase or lease of its vehicles. The company also provides retail leasing through the purchase of lease contracts originated.

HISTORY

94

Hyundai Motor Company was established in 1967. A licensing agreement was signed with Ford in the following year.Hyundai started to develop its own in-house models passenger cars, cargo and dump trucks in 1976.The company established a technology partnership with Mitsubishi in 1981. Hyundai developed a range of proprietary engines in the early 1990s. The first engine, called the Alpha, was launched in 1991. In the mid 1990s, two new research and development centers were established in Namyang and Chonju.Hyundai purchased the automotive company Kia Motor in 1998. The company also built a new manufacturing plant in China in 2000. In the same year, the company established an alliance with DaimlerChrysler. Hyundai decreased its stake in Kia Motors to 46%, in 2001. In the following year, DaimlerChrysler acquired a 50% stake in Hyundai's heavy truck business. Also in 2002, Hyundai sold its Hyundai Automotive Distributors Australia (HADA) wholesale vehicle distribution business to Cycle & Carriage and its subsidiary Cycle & Carriage (Australia).The company established a car plant in Slovakia with an investment of $870 million in 2004. Also in the same year, DaimlerChrysler announced that it had sold its 10.5% stake in Hyundai for E740 million.WIA, a subsidiary of Hyundai Motor acquired both Machine Tool Engineering department of HMC and Hyundai machine tool Europe in 2005. In the same year, Hyundai Motor started the building of a second assembly plant in India. In the same year, the company entered into an agreement with Guangzhou Motor Group to set up a $1.2 billion commercial vehicle joint venture in China. Also in the same year, METIA, the company’s wholly owned subsidiary acquired Samjoo Machinery.Hyundai’s subsidiary, Kia Automotive Group opened the new environmental technology research and development center in Mabuk, Seoul during the same year.In February 2006, Hyundai Motor unveiled Genus wagon at Geneva Motor Show 2006 to serve the growing demand in the Europe. After two months in April 2006, the company launched 2007 Elantra at the 2006 New York International Auto Show. Also in the same month, Hyundai Motor broke ground for a second automotive manufacturing plant in Beijing near its existing plant of Beijing Hyundai Motor to double its production capacity to 600,000 units. The production would begin at this plant in April 2008. Hyundai Motor unveiled Tiburon Coupe at the Guangzhou Motor Show in July 2006. The Tiburon is powered by a 2L 16-valve DOHC with Continuously Variable Valve Timing coupled to 5-speed manual transmission or a 4-speed automatic transmission with Hyundai’s Shiftronic semi-automatic gear selector.

95

The company launched Veracruz, a seven-seat sports utility vehicle in October 2006 positioned as a ‘luxury utility vehicle’. In the same month, Hyundai Steel, a unit of the Hyundai-Kia AutomotiveGroup, broke ground for its first integrated steel mill inside the Tangjin steel complex, 100km south of Seoul, on the Korean peninsula's west coast. The steel mill is expected to produce seven million tons of hot-rolled steel sheet and steel plate annually by end of 2011.In March 2007, Hyundai introduced the i30, a new car model along with a new naming philosophy with model lines bearing the i prefix (stands for inspiration) at the 2007 Geneva Auto Show. The i30Hyundai is a new model range positioned in the C segment cars. In the same month, Hyundai Motor along with GE Plastics presented QarmaQ, a first in the Crossover Coupe segment. The QarmaQ is Hyundai's Advanced Technology Demonstration Vehicle (ATDV).Also in the same month, the Hyundai-Kia Automotive Group and Infineon Technologies, a leading semiconductor supplier to the automotive industry entered a partnership for the development ofautomotive electronics.Hyundai Motor launched Concept Genesis premium sports sedan in April 2007 at the New York International Auto Show 2007. Genesis is powered by Hyundai´s newly developed Tau DOHC 32-valve V-8 powertrain. In the same month, the company unveiled three brand-new models at the 2007 Seoul Motor Show opened at KINTEX. The vehicles include Veloster, a sporty coupe which caters to the unique requirements of the Y-generation; and the TQ van and the FD estate wagon.Also in April 2007, Hyundai opened CKD Assembly Plant in Brazil.Also in April 2007, Hyundai Motor broke ground for the construction of its E1.1 billion manufacturing plant in Nosovice, Czech Republic.The plant is expected to build 200,000 vehicles annually beginning with the i30 C-class five-door hatchback and a yet-to-be-revealed compact minivan (codenamed YN). In the second phase, an additional 100,000 units per annum of capacity would be added by 2011 to build a third model.

KEY EMPLOYEE BIOGRAPHIES

Mong Koo Chung

Board: Executive BoardJob Title: Chairman and Chief Executive Officer

96

Since: 2005

Mr. Chung has been the Chairman and Chief Executive Officer of Hyundai Motor since 2005. He began working in the automobile business in 1970 as a Manager in the Hyundai Motor Company.Mr. Chung started selling cars through Hyundai Motor Service in 1983 in the Choongchung and Ceju Province in South Korea. He is also the Chairman and Chief Executive Officer of Kia MotorsCorporation.

Dong Jin Kim

Board: Executive BoardJob Title: Vice Chairman and Chief Executive OfficerSince: 2004

Mr. Kim has been the Vice Chairman and Chief Executive Officer of Hyundai Motor since 2004. Heis the President and Chief Executive Officer of Hyundai Star Commercial Vehicle Systems andPresident and Chief Executive Officer of e-HD.com. Mr. Kim is also the Chairman of Korea GeospatialInformation and Technology Association.

Yeo Chul Youn

Board: Executive BoardJob Title: President, Plant Manager, HMC Ulsan PlantSince: 2006

Mr.Youn has been the President of Hyundai Motors since 2006 and also serves as the Plant Managerof HMC Ulsan Plant. He is also the Head of the Labor Management system.

Kwang Nyun Kim

Board: Non Executive BoardJob Title: DirectorSince: 2005

97

Mr. Kim has been a Director of Hyundai Motors since 2005. He is also the Director of Korean Bar Association and Hyundai Hysco.

Dong Gee Kim

Board: Non Executive BoardJob Title: DirectorSince: 2004

Mr. Kim has been a Director of Hyundai Motor since 2004. He is also the Director of Korea University,International Graduate School and Advisor of Korea International Trade Association.

Byoung Il Park

Board: Non Executive BoardJob Title: DirectorSince: 2006

Mr. Park was appointed as a Director of Hyundai Motor’s in 2006. He is also the Representative ofShin II accounting office.

MAJOR PRODUCTS AND SERVICES

Hyundai Motor Company is a leading automobile manufacturer. The company's key products and services include the following:Passenger carsRecreational vehiclesCommercial vehicles:Bare chassisLarge busLarge truckLight commercial vehiclesMedium busMedium truck

98

Small busSmall truckSpecial vehiclesBrands:AccentAtos PrimeCentennalElantraGetzHDHyundai CoupeMartixSanta FeSantroSonataTerracanTrajetTusconXG

Head OfficeHyundai Motor Co.231 Yangjae-dongSeocho-guSeoul 137 938KORP:82 2 3464 1114F:82 2 3463 3484

http://www.hyundai-motor.com

(d)-Toyota Tsusho Corporation

COMPANY OVERVIEW

99

Toyota Tsusho Corporation (TT) is primarily a trading company which trades products such as metals, machinery and electronics, automotive, energy and chemicals, foodstuffs and consumer products, and services and materials.The company primarily operates in Japan, Asia, North America and Europe. It is headquartered in Nagoya, Japan and employs about 22,900 people.The company recorded revenues of JPY6,212,726 million (approximately $52,690.1 million) during the fiscal year ended March 2007, an increase of 57.5% over 2006. The operating profit of thecompany was JPY110,002 million (approximately $932.9 million) during fiscal year 2007, an increase of 37.4% over 2006. The net profit was JPY77,211 million (approximately $654.8 million) in fiscal year 2007, an increase of 68.8% over 2006.

KEY FACTS

Head Office Toyota Tsusho Corporation

9-8 Meieki 4-chome

Nakamura-ku

Nagoya 450 8575

JPN

Phone 81 52 584 5000

Fax 81 52 584 5636

Web Address http://www.toyota-tsusho.com

Revenue / turnover 6.2

(JPY Mn)

Financial Year End March

Employees 22,945

Tokyo Ticker 8015

BUSINESS DESCRIPTION

Toyota Tsusho Corporation (TT) is the trading unit for the Toyota Group, which includes Toyota Motor and auto parts maker DENSO. The company

100

trades a range of products, including metals such as steel and aluminum, machinery and electronics, energy and chemicals, and various consumer products. The company also exports Toyota vehicles around the world and imports products which include imports bean sprouts, sesame and other foods and sells personal nursing care equipment.The company operates through subsidiaries primarily in Japan, Asia and Oceania, North America and Europe.

The company primarily operates in seven business segments which include: metals; machinery and electronics; automotive; energy and chemicals; produce and food stuff; consumer products services and materials and others.

The metal business segment processes, manufactures and sells construction steel, precious metals,rolled light metals, nonferrous scraps, alloy iron and catalyst recycling. This division develops new materials and processing technologies and markets them. The steel plates and pipes businesses,within this segment, focus on processing bases.The company also offers scrap metal collection and processing for factories as well as ELV (End-of-Life Vehicle) recycling.The machinery and electronics business segment procures products from domestic and international sources and provides support services across various industries such as machinery and equipment,information and electronics, and overseas production parts. The services provided by the segment include consultation and planning, technology development, quality control, and logistics support services that facilitate local production systems.

Under this segment the company handles equipment for every industry, and offers engineering service such as planning, post-operation follow-up, consultation on the optimum selection and integration of equipment and factory layout, installation, adjustments and maintenance.The segment develops technologies in semiconductors, communications, and data processing , proposes applications of technologies and provides quality control and delivery management services. It conducts system integration businesses that support the establishment of communications network mainly for Japanese affiliated firms overseas.

The company's automotive business segment exports and re-exports vehicles produced in overseas plants. The segment operates over 80 worldwide locations and offers factors-sales, spare parts and services and service to car dealers in each country. This division also provides training in several support functions such as sales and marketing. The segment focuses on sales and

101

services of passenger vehicles, commercial vehicles, light vehicles, two-wheeled vehicles, trucks and buses and automotive parts.The energy and chemicals business segment procures and supplies synthetic resins, chemical products and basic energy resources such as petroleum and coal. The company's chemical and synthetic resin field adds value through blue-chip supply sources and enhances its tank operations in China and Southeast Asia.

The energy plant sub-segment is involved in importation of crude oil from the Middle East, and development of coalmines in Australia and secures a stable supply of resources and energy for use in upstream applications. The project development expertise gained through experiences from the plant business and is utilized to tap opportunities in the midstream (refining/ transport) and downstream (wholesale/retail electricity) areas.The company is also involved in the development of environmentally friendly wind power and natural gas businesses domestically and internationally.

The produce and food stuff business segment handles a range of food products such as food ingredients and prepared frozen foods, as well as products including livestock feeds, oils/fats, rice,wheat, raw sugar and products processed from such materials. It operates a grain-processing facility centered on 4 grain silos located in Japan. These silos are equipped with docks for large vessels and dedicated supply lines to formula feed manufacturers inland.TT supplies semi-finished foodstuffs and imports bean sprouts, sesame seeds and buckwheat.

The consumer products services and materials business segment covers development, sales and delivery of materials for car interiors and clothing. Under the housing division the segment develops condominiums with features for added comfort, and utilizes real estate securitization schemes for commercial properties. The company provides insurance a variety of coverage types, including automobile insurance and group insurance for partner companies. The segment is also invovled in nursing care under which it sells and rent nursing care equipment such as wheelchairs and beds.

HISTORYToyoda Kinyu Kaisha was established in 1936 to provide consumer financing for Toyota automobiles.

In the year 1942, the company name changed to Toyoda Sangyo Kaisha and subsequently extended the range of its activities to include trade.

102

In the year 1948, the trading division of Toyoda Sangyo Kaisha is established as a separate company (Toyota Tsusho Corporation) under the name Nisshin Tsusho Kaisha. The company name changed to Toyoda Tsusho Kaisha in 1956. In the following year, it established first overseas joint ventures as Toyoda Thailand.

The company established its first overseas subsidiaries as Toyoda New York in 1960. In 1987 the company name changed to Toyota Tsusho Corporation.Toyota Tsusho entered a business tie-up with Kasho Company in 1999. The company entered a capital investment and business tie-up with Tomen Corporation in 2000. In the same year it merged with Kasho Company.

Toyota Tsusho Corporation, Toyota Tsusho America, Kimura Unity Company and Kimura, established a joint venture company in the United Mexican States in 2004.

In April 2006, the company merged with Tomen Corporation. In the same month, the company and Toyota Boshoku Corporation established a joint venture to produce seats for vehicles in St.Petersburg, Russia. In May 2006, the company and Guangzhou Guangqi Trading Automobile Group Business Company jointly established an automobile parts logistics joint venture as Guangzhou Automobile Toyotsu Logistics Company.The company entered a joint venture agreement with eight companies, Mitsubishi Gas Chemical Company, Itochu Corporation, Japan Petroleum Exploration Company, Taiyo Oil Company, TOTAL Di-Methyl Ether Japan, JGC Corporation, Mitsubishi Heavy Industries, and Mitsubishi Chemical Corporation to establish a joint venture company for DME production, and to construct a 80,000T/A DME production plant within Mitsubishi Gas Chemical Company Niigata Factory (Niigata-shi) in February 2007.In the same month, the company established a joint venture business with Tianjin Toyotsu Otsuka Textile Company together with Otsuka Corporation to manufacture needle punched carpet for cars in Tianjin, China. During the same month, the company and Tokyo Electric Power Company completed the construction of a Clean Development Mechanism (CDM) project facilities to recover methane from a tapioca starch factory in Kalasin Province, northeastern part of Thailand, through Cassava Waste To Energy Company, an operating company, invested by Toyota Tsusho Corporation, TEPCO and Clean Energy Development Company. Toyota Tsusho Corporation acquired greenhouse gas emission rights from their promotion of a methane power generation project using the clean development mechanism (CDM) at a landfill processing facility (landfill) in Jiangsu Province, China in March 2007.In July 2007, the company and

103

Hasetora Spinning Company jointly established Tuftora Automotive Carpet, a joint venture company for manufacturing tufted carpets for cars at Chattanooga in theState of Tennessee, in the US.

MAJOR PRODUCTS AND SERVICES

Toyota Tsusho Corporation is engaged in manufacture of metals, machinery and electronics,automotive, energy and chemicals, produce and foodstuffs and consumer products, services and materials. The company's key products and services include the following:

Metals:Alloy iron, pig iron

Common steel, special steel, construction steel

End-of-life vehicle/catalyst recycling

Nonferrous metals, precious metals

Rolled light metal products

Scrap iron, nonferrous scraps

Machinery and electronics:Automotive parts for overseas production

Communications equipment

Electronic devices/components

Forklifts

IC (integrated circuit) testing and evaluation equipment

Intelligence Transport System (ITS) equipment

Machine tools, industrial machinery and textile machinery

PC peripheral products and software

Plant engineering

Semiconductors

104

Automotive:

Automotive parts

Commercial vehicles

Light vehicles

Passenger vehicles

Trucks and buses

Two-wheeled vehicles

Energy and chemicals:

Coal

Crude oil

Energy/electricity supply

Fat and oil products, synthetic resin, chemical additives

Fine chemical/inorganic chemical products

Highly functional, specialized chemical products

Natural/synthetic rubber

Organic chemical products

Petrochemical products

Petroleum and natural gas products

Petroleum products, LPG (Liquid Petroleum Gas)

Plants

Produce and foodstuffs:

Agricultural and marine products

Alcoholic beverage

Food ingredients

Grains

105

Livestock feeds

Processed foods

Consumer products, services and materials:

Bedding

Car interior materials/parts

Clothing

Condominiums and commercial properties

Construction, housing material and furniture

Interior products

Packaging material

Paper/pulp

Property and casualty insurance

Textile material

Textile products and jewelry

Visible light photo catalysts.

Head Office

Toyota Tsusho Corporation9-8 Meieki 4-chomeNakamura-kuNagoya 450 8575JPNP:81 52 584 5000F:81 52 584 5636

Category No. of Shares held (Face Value of Rs. 5

each)

Percentage of Shareholding

Promoter’s holding Promoters 5,28,24,020

15,66,18,440 18.28 54.21

106

- Indian Promoters

- Foreign Promoters

Persons acting in concert - - Sub-Total (A) 20,94,42,460 72.49 Non-Promoters Holding

107

PROMOTERSAND

BACKGROUND

108

CHAPTER - 4 PROMOTERS AND BACKGROUND

1. Name, number of shares held and percentage share holding of entities / persons mare than 1% of the shares of the Company:

A)Promoters –

Name of the Entity / Person

No. of Shares held Percentage in Shareholding

a) Indian Promoters -

President of India

5,28,24,020 18.28

b) Foreign Promoters -

Suzuki Motor Corporation

15,66,18,440 54.21

B) Non-promoters –

Name of the Entity / Person

No. of Shares held

Percentage in Shareholding

Banks / Financial Institutions and Insurance Companies

109

a) Life Insurance Corporation of India

99,32,974

3.438

FII’s

a) HSBC Global Investment Funds A/c.

83,22,945

2.881

b) Morgan Stanley and Co. International Limited

40,32,349

1.396

c) Emerging Markets Growth Fund Inc.

33,67,800

1.166

2. Total foreign shareholding is 20,28,00,300 equity shares, which accounts for 70.195 % of the total paid up share capital of the Company.

110

VENDORSAND

SUPPLIERS

111

CHAPTER - 5 VENDORS AND SUPPLIERS

MARUTI COMPANY SUPPLY CHAIN

Maruti companies purchases of production inputs primarily comprise raw materials and purchased components.In fiscal 2002, 28% of our raw materials and components consumed were imported and the remaining 72% were purchased from sources within India.

Raw Material Suppliers

The raw materials used in our manufacturing process primarily comprise steel coils and paints.We require our suppliers to comply with stringent quality specifications. We purchase steel coils from manufacturers in Japan, Korea and, to some extent, India. In recent years, we have sought increasingly to localise our purchases of steel coils with a view to reducing costs. We purchase our paint requirements from Indian suppliers.We earlier followed the tender system for the purchase of steel. Under this system, we advertised our specifications and had to accept the lowest price offered by a supplier who could meet our specifications. Last year, we moved to the quotation system where we have the flexibility to renegotiate prices once an offer is submitted. We issue standard purchase orderscovering a period of six months for purchase of steel from foreign suppliers. We generally enter into one-year contracts for the purchase of steel from Indian suppliers and issue purchase orders in line with our requirements.We generally enter into one-year contracts for the supply of paints and issue purchase orders as and when we require supplies.

Local Vendors

Since our inception, we have helped establish an organized automobile component industry in India through our vendor development program. We have developed our vendor base in India to address our specific needs and we believe that the efficiency of our vendors’ production processes, and the quality and competitiveness of their products, have generally improved in the

112

course of their association with us. A large number of our vendors depend on our purchases for a substantial majority of their turnover. We play a collaborative role with our vendors by assisting them in periodically improving their processes and through training and interaction,regular audits and follow-ups in order to reduce line rejections and warranty cost. We seek to align our vendors’ interests with our own and bring their manufacturing and service standards in line with our requirements. The role of our vendors has gradually evolved from tactical to strategic where the vendors work in close coordination with us to meet our long-term goals in terms of:

# component development;# quality;# delivery; and# cost control.

In order to improve quality and generate economies of scale, we have reduced the number of our vendors of components in India from 370 as of March 31, 2000 to 299 as of March 31, 2003,and intend to continue to reduce the number of our vendors. As of March 31, 2003, 13 of ourvendors were our joint venture companies. The details of the commercial arrangements and other details of the joint ventures have been presented in the section entitled “Our Group Companies”. As of the same date, 113 of our vendors had collaborations with foreign entities,which help them to gain access to advanced facilities and systems, technical data and expertise.Our top ten local vendors accounted for approximately 34% of our aggregate purchases of components from vendors in India.

Agreements with vendors

Our vendors supply components in accordance with purchase orders and supply schedules periodically provided to them and time of delivery is the essence of the agreement. Our agreements with our vendors require that they sell components that are made in accordance with designs, drawings and specifications provided by Maruti, exclusively to Maruti. These agreements require that the vendor adopt Maruti’s established quality control procedures and permit periodic inspections of components and audits of its premises by Maruti. Repair and replacements costs of defective components supplied are borne by the vendor. Our agreements with our vendors typically permit

113

termination by the aggrieved party upon breach of the agreement. In addition, these agreements provide for automatic termination upon the occurrence of (1) a change in the ownership of the vendor, (2) merger or amalgamation of the vendor with a third party, (3) transfer of a material portion of the assets of a vendor to a third party so that components cannot be supplied to Maruti without the assistance of the third party,and (4) insolvency of the vendor.

Delivery by Vendors

Most of our vendors have developed flexible manufacturing systems, which enable them to align their production to our changing requirements. We have a delivery instruction system that provides details of our component requirements for every 15 days, across the different variants of the various models, to our vendors. We are linked to our vendors through our Internet-based information network, which maintains online information regarding order status and deliveryinstructions. This capability has helped in reducing both inventory levels and lead times required for the supply of various components and sub-assemblies, and has enabled our vendors to more efficiently plan and dispatch their products.Vendors located within a radius of 100 kilometers from our facility supply the majority of our components. This has enabled our vendors to eliminate packaging and supply components directly to the assembly line.

Reduction of Vendor Costs

We have begun working with some of our major vendors to implement the MPS, which focuses on the elimination of wasteful activities in their manufacturing processes. We continue to work with our vendors in areas such as improving their productivity, reducing the number of theircomponents that are rejected, reducing materials handling, improving their yield from materials,and reducing their inventories. This helps reduce their costs of production, and also reduces the costs of our components.We set targets with vendors for cost reduction, and for the initial period of the cost reduction, we share the benefits of the reduction with the vendor to provide an additional incentive for the vendor to reduce costs. In addition, we plan to begin to integrate our vendors into the worldwide purchase system, or WWP, whereby a vendor may become the sole supplier for a Suzuki product

114

in several countries including India. This would generate economies of scale forn the vendor that also result in reduction of our costs.Through value analysis, or VA, we aim to minimize the cost of manufacturing a component without changing its functional utility. Through value engineering, or VE, we aim to minimize costs at the stage of designing the component, before commencing production. We have adopted cost-efficient designs for certain components from Suzuki to enhance our competitiveness in terms of price and quality, with respect to the components. We have thesupport of 250 engineers trained in VA and VE to help us conceive and implement our VA/VE activities.The warranty costs of our vendors are computed as the cost of components incurred by our vendors to service warranty claims arising from defects in components supplied by them. We have been able to reduce the warranty costs of our vendors per vehicle, which is computed as the ratio of (1) the aggregate annual warranty costs of our vendors to replace defective products, to (2) the numbers of vehicles sold in the fiscal year, by approximately 21% between fiscal 2002 and fiscal 2003.

Vendor Quality Control

Quality management system such as ISO 9000/ QS 9000 forms the basis for producing a quality product. To assist small and medium vendors in achieving ISO 9000 certification, in 1995 we adopted a cluster approach wherein we grouped vendors together, trained them in qualitymanagement and assisted them in obtaining ISO 9000 certification. This cluster approach was extended to helping vendors attain QS 9000 certification. As of March 31, 2003 approximately 114 vendors had obtained ISO 9001/2 certification, 122 vendors had obtained QS 9000certification and 11 vendors had obtained TS 16949 certification. We conduct periodic vendor quality system audits in order to ensure that quality standards are sustained.

115

Supply Chain in Maruti Company

Our Suppliers Our Partners Our Strength

Our suppliers have been our partners in growth. The joint initiatives taken by Maruti and its team of suppliers have generated over 29% cost reduction over three years for Maruti.

Working with Suppliers

Participation has been the key to our success. Through a participative and collaborative approach called Value Analysis & Value Engineering, we have been successful in bringing cost reduction across all our models. The localization levels are as high as 85 per cent.

The underlying basis of our relationship has been that rather than focus on "price reduction" of the component, we have to work together to bring down the "cost" of the component.

One of the ways to reduce their cost has been to replicate the Maruti Production System on the shop floor of supplier companies. These techniques have been transplanted through the Maruti Centre for Excellence. The suppliers, too, have been able to reduce wastage and make their operations lean and efficient.

Rather than appropriate the entire gains, we have a system whereby suppliers keep a part of the productivity and cost gains and pass on the rest in the form of a price reduction.

The other route to cost reduction has been Value Analysis & Value Engineering, another collaborative effort between our suppliers and us.

Thanks to our efforts to improve efficiencies and reduce cost, both in-house and at our suppliers, we have been able to reduce car prices for customers over the past 5-6 years

116

ModelsPrices in 2001-02

Prices Today approx.

Alto LX 299,615/- 224,318/-M800 (Std)

159,747/- 162,415/-

Esteem LX

375,630/- 369,041/-

These are Ex-Showroom (Indicative) prices as of October 2007.

Emerging Trends - Strengthening Supply Chain

For attaining the million mark, Maruti Suzuki is aggressively working on different facets of the supply chain.The company is rapidly moving from 'Domestic Leader' stature to 'Global Leader' stature by adopting global practices.

Transition from Component supplier to System Supplier.Raising the quality and responsibility benchmarks for Tier-I or primary suppliers, Maruti is encouraging its component suppliers to graduate to system suppliers.

As number of system suppliers increases the model launch time reduces.

Involving vendors at development stageAnother interesting initiative is the early involvement of suppliers. It triggers innovations at the designing stage itself. Suppliers are being trained to evolve as innovation drivers by engaging them at new product designing stage.

Perhaps that is reason why our models now are launched with as high as 90 per cent levels of localization.

117

DEMAND AND

SUPPLY

118

CHAPTER - 6 DEMAND AND SUPPLY

Demand

The demand for cars in the past was supply driven as demand did not match supply. This led to high premium and long waiting periods for the cars. But change in government policies coupled with aggressive capacity additions and upgradation of models by MUL in the early nineties led to increase in supply and subsequently reduced the waiting periods for economy cars.

The demand for cars was suppressed by various supply constraints. The demand for cars increased from 15,714 in FY60 to 30,989 in FY80 at a CAGR of only 3.5%. The entry of Maruti Udyog Ltd (GoI-Suzuki JV) in 1983 with a "peoples" car and a more favorable policy framework resulted in a CAGR of 18.6% in car sales from FY81-FY90

After witnessing a downturn from FY90 to FY93, car sales bounced back to register 17% growth rate till FY97. Since then, the economy slumped into recession and this affected the growth of the  automobile industry as a whole. As a result car sales remained almost stagnant in the period between FY97 and FY99. CAGR recorded during the FY94-FY99 period was 14.4%, reaching sales of 409,624 cars in FY99. However, during FY2000, with the revival of economy, the segment went great guns posting a sales growth of 56%yoy.

The table below indicates the past sales trend for cars -

Cars FY94 FY95 FY96 FY97 FY98 FY99 FY2000

Volume 209,203 264,822 345,486 410,992 417,736 409,624 638,815

Growth %yoy

27.0 27.0 30.0 19.0 2.0 -2.0 55.8

The demand for cars is dependent on a number of factors. The key variables are per capita income, introduction of new models, availability & cost of car

119

financing schemes, price of cars, incidence of duties and taxes, depreciation norms, fuel cost and its subsidization, public transport facilities etc. The first four factors viz, increase in per capita income, introduction of new models, availability & cost of car financing have positive relationship with the demand whereas others have an inverse   relationship with demand for cars

The demand for cars in the future can be estimated with the help of making use of macro economic variables like growth in GDP, per capita income etc. or house hold penetration technique. An attempt is made to estimate the potential demand for passenger cars based on the household penetration level of passenger cars as explained in Annexure 4 of the report.

The demand for cars in the future is expected to come predominantly from the existing two-wheeler owners who will be upgrading to a four-wheeler, due to rising income and necessity of car for personal transportation purposes. Therefore, excluding the owners of mopeds, the potential demand for cars in the next fifteen to twenty years can be taken as 50% of the existing two-wheeler population of around 28mn units.

But with the release of new models in the higher end of the economy segment, the supply of second hand economy cars is expected to increase substantially, which will be costing just about two times the price of premium range two-wheelers. This could affect the demand for first hand/new cars. Also, with cross demand from utility vehicles, availability of finance and other factors the above mentioned potential for cars will be difficult to realize. Growth in the segment  thus is expected to hover around 15-20%yoy.

The dominance of economy segment will continue in the future as it will provide large volume to Indian car industry. This is because a majority of customers for cars will graduate from two-wheelers. The demand for mid-sized and premium cars is   expected to rise as new models enter the market, income levels rise and present car owners upgrading from the economy segment to higher end cars.

120

Supply

The supply of cars in Indian industry till 1991, was dependent upon the production capacity of individual players. The production of cars has increased from 42,475 units to 181,420 units from 1981 to 1991 respectively. The growth in production of cars has varied in the last three decades from just 1% in 1970-80 to 21% in 1980-90 and above 15% in 1991- 96. The table below gives the production numbers of passenger cars in the past few years.

Cars FY94 FY95 FY96 FY97 FY98 FY99 FY2000

Production 207,658264,468 348,146 407,539 401,002 390,355 577,243

Growth %yoy

27.2 27.4 31.6 17.1 (1.6) (2.7) 32.4

Source : SIAM  (excludes the figures related to Daewoo and Honda Siel)

The major increase in production of cars in the 80's was due to the entry of MUL in 1983, which helped increase car production by 20,000 to 30,000 cars per annum till the early nineties.

With the entry of MUL, the face of the passenger car industry changed forever. Existing producers who had operated in a protected, high margin environment faced the prospect of not just diminishing market share, but a shift in focus from producing vehicles to selling them. But MUL made use of the opportunity open to its technologically superior product and increased its capacity from 100,000 cars in FY90 to 240,000 cars in FY96 and 350,000 cars in FY98.

The opening of economy in 1993, attracted world majors who joined hands with existing auto majors, to start their operations at the earliest. The first ones to enter the field were Mercedes Benz in joint venture with Telco to manufacture E220, E250D models, Peugeot in JV with PAL to manufacture Peugeot 309L, Fiat in JV with PAL to manufacture Fiat Uno.

121

This has helped in increasing the number of models available to the customer from 8 to 30 and hence provided a wide choice to him. This has also helped in reducing the average waiting period and premium on cars, which were a part and parcel of car cost in the eighties.

Market share

The market shares of leading players for the month of May 2000 is as given below.

Company Market Share

Maruti Udyog 52.4%

Hyundai Motors 14.4%

Telco 9.9%

Daewoo Motors 11.5%

Hindustan Motors 3.9%

Ind Auto 2.1%

Honda Siel 1.7%

Others 4.1%

Source : SIAM

MUL has lost market share during the past two years. From a high of around 80%, it has now come down to 62.2% in FY2000. Offerings from new players like Ford, Hyundai, Daewoo and Telco have captured a substantial market share from MUL. PAL Puegeot and Fiat India, which have commanded a good part of the market in FY97, have now fallen back on hard times.    

122

During FY2000, the passenger car rally was as usual headed by the economy cars. Maruti which is facing a constant threat  from Hyundai (Santro) and Daewoo (Matiz), came out with Japan's largest selling model Wagon R. Also, the mid sized segment saw some action signifying its growth potential. The car market which had witnessed a flurry of new launches in the economy segment in FY99, was now party to sleek entrants in the mid sized segment from Hyundai (Accent), Ford India (Ford Ikon), Daewoo (Nexia) and Fiat India (Siena). Also MUL (Baleno) and GM (Opel Corsa) belonging to the higher end mid sized segment also hit the ramp. The constantly escalating competition in the economy segment forced the players into further price cuts. Recently, Maruti lowered the prices of its economy cars by as much as Rs40,000.

Capacity

The present production capacities is detailed in the table below. This has increased from an estimated 600,000 units in FY98 to the present 727,000 units in FY2000.

Car Capacity FY2000 Expected

Maruti Udyog 250,000 350,000

Hyundai 110,000 130,000

Telco 100,000 150,000

Daewoo 72,000 130,000

Ford India 50,000 70,000

Fiat India 60,000 60,000

General Motors 25,000 100,000

Honda Siel 30,000 30,000

123

Hindustan Motors* 30,000 50,000

Total 727,000 1,070,000

Thus, capacity utilization in FY2000 stands at 79.4%. This is still better than utilization levels the world over which stands at around 40%. Production capacities is expected to increase in the next two years as players introduce new models. The major increase in supply, as was witnessed in FY2000, will be in the mid-size and luxury segment. The supply in the future, taking into account the plans announced by the car majors is expected to grow to 1,070,000 cars by 2002. 

The segment which has seen a number of new entrants in the recent past will see two new models from the stable of Maruti namely the 'Alto', which will be available in the 800cc and 1000cc configuration. However, industry sources have indicated that after the hectic action of the past two years, this segment will slowly witness some stability in terms of sales volumes and prices. The entry of new players is expected to create a marketing warfare in the car industry. A start has already been made by sharp reduction in prices of Daewoo 'Cielo' and Maruti 800. Lately, the price of Wagon R was also lowered by MUL to face the intensifying competition. However, with manufacturers having to comply with Euro emission norms, car manufacturers have sold their products at lowered margins. This is expected to effect their ability to reduce prices in the future.  

Increased support through finance from auto manufacturers was quite evident in FY2000. This has and will in the future induce existing owners of cars to go for technologically superior products in the same segment leading to sharp drop in prices of second-hand cars. This will also create a platform for upgradation of existing two-wheeler owners to four-wheelers.

The luxury segment will see more new entrants namely Toyota of Japan, Skoda of Czech Republic and Proton of Malaysia in the years to come. Recently, companies like MUL, GM and Hindustan Motors have come out with new models to cover the present gap in the segment. Therefore, the customer will be having a wider choice to choose depending on his specific needs.

124

Exports

The passenger car exports in the eighties and early nineties had been very negligible as the companies were facing capacity constraints, that was not even sufficient to supply to the domestic market. The poor quality of cars compared to international standards led to poor quantity of exports from the country.

In 1985, MUL started exporting cars to neutralize the impact of foreign exchange outflow. The exports of MUL increased from 100 cars in FY87 to 6,000 cars in FY90. The exports witnessed further momentum in the nineties to reach a volume of 37,161 in FY97. But from FY98 onwards, a southward trend was witnessed with declining sales of 20% yoy to 29,747 vehicles. The same continued in FY99 with a further drop of 14%yoy to 25,464 units. FY2000 too saw lackluster exports with a 9% fall in export sales which touched 23,271 units. The reason for sharp drop in car exports has been a drop in MUL exports, which now accounts for 90% of the country's total exports.

However, exports are expected to increase in the near future as for the first time, new entrants like Daewoo, Hyundai, Honda Siel, GM and Ford are busy investigating options in the world markets. Daewoo has already made a beginning by exporting its small car Matiz to Italy. Also GM has commenced exports to Nepal and is further considering Sri Lanka as a potential export market. Further Ford is scheduled to commence exports by the end of the third quarter of the current fiscal.

In the longer run, as the industry matures, exports should increase as manufacturers strive to attain economies of scale, which will not be possible given the relatively small size of the domestic market.

Key Earning Drivers

Government policy: The GOI policy will continue to dominate the supply of cars. The different norms with great significance to the sector are import duty on CKD/ SKD kits, auto components, foreign exchange and neutralization schedule for new ventures etc.

125

Excise duty: The car industry had been asking for reduction in excise duty so as to reduce the end prices of cars to customers and increase the slogging demand. With continuation of liberalization and shift in the perception (of car being a luxury product) will lead to reduction in duties over a period of two to three years. This will reduce the prices of cars leading to further boost in demand.

Sales tax duty: The levy of uniform sales tax in all the states, will have a negative impact on the demand front, due to increased prices.

Competition in the sector: With the entry of all the world majors in the car segment, the competition is expected to heat up substantial in the next two years. This will lead to shakeout in the industry and only those companies having a backing of multinationals with strong commitment will be able to continue operations in the segment. This may also lead to take over activity in the Indian car industry.

Release of new models: The flood of variations in existing and new models will provide wide range of choice for the customer one year down the line. Also these new models will be able to carve a niche for themselves in the crowded market.

Outlook

Local market trends

Sales, particularly in the small car segment, will drive passenger car sales in the near term. However, within the next two years, capacity is expected to be twice the total demand for cars.

With developments in the small car segment acquiring a degree of stability in terms of price competition, the action is shifting to the mid-size car segment. Sales in this segment will pick up as new models come in and income levels rise but it is still some time till it comes anywhere close to the economy sized segment.  

What will also drive car sales is the wide availability of finance schemes by a variety of banks and FI's.

126

Sales in the used car market is also expected to do well as more and more older models get replaced by newer ones at a faster pace. The coming in of Euro III and IV norms will also increase scrappage rates.

In view of expected surplus in the domestic market, India will emerge as one of the leading car sourcing point in the Indian subcontinent.

Consumers will be the beneficiaries as a result of marketing war, as they will be offered technologically superior products at better prices and terms and conditions. But the customer has a risk of model discontinuation as a result of shake-out expected in the industry.

International trend

The global automotive car market is growing at a rate of only 2% per annum and is not expected to pick up in the near term. Growth has dropped due to the increasing levels of saturation in the larger car markets of the world. Worldwide the trend is towards ensuring that one's products are superior in terms of quality. This will enhance the useful life of cars and, hence, slow down growth in sales.

The global domination of the larger automotive manufacturers is slowly on the wane and the trend in sales is shifting towards more "regio-centric" products. Automakers that have been enjoying a generally prosperous spell would have to rethink on the way vehicles are designed, manufactured, distributed or sold. Already, players like GM, Volkswagen and Toyota have begun to re-examine their dealer relationships and pricing strategies. Carmakers would now have to think in terms of a new customer focus and provide better financing and servicing.

Strategic tie-ups, mergers and acquisitions have become the talk of the day. A few instances are Daimler Benz's tie-up  with Chrysler of the US, Ford's acquiring of  Daewoo and tie up with Volvo Car Corporation and Renault acquiring a stake in Nissan. Such deals would certainly lead to economy in terms of costs but it remains to be seen whether they will also create significant new opportunities for growth.        

Potential Demand For Cars

127

We will attempt to show how the twin factors of rising income and finance schemes have made it all the easier to buy a car and try to estimate likely demand levels in the future.

First take income levels for instance. Ten years back, the country embarked on a policy of economic liberalization. Since then it has been seen that households have moved up the income ladder with the number of households in the lower income groups actually declining. According to the NCAER, from FY93 to FY96, the proportion of low-income households has declined rapidly than in the pre-reform period. In absolute terms, 10mn households graduated outside the low-income group. At the same time, the proportion of households in the high-income group went up. If we look at the table below, we can compare the distribution of households (%) in the various income groups in the pre-reform and post-reform periods.

Annual income (Rs)at FY96 prices

Income group

FY90 FY96

Urban Rural Total Urban Rural Total

Less than 25,000 Lower 37.1 67.3 58.8 27.9 57.2 48.9

25,001 - 50,000 Lower Middle 34.8 23.9 26.9 34.9 29.0 30.7

50,001 - 77,000 Middle 17.9 7.1 10.1 20.3 8.6 11.9

77,001 - 106,000 Upper Middle 6.5 1.2 2.7 9.6 3.1 5.0

More than 106,000 High 3.8 0.5 1.4 7.3 2.0 3.5

Source: NCAER

Assuming that a household will save 35% of its income to pay for annual loan installments, fuel and maintenance charges, then the following table suggests that the annual income will have to be around Rs260,000 for a new car and Rs150,000 for a second-hand car. According to NCAER Market Demographics Report of 1998, the number of households under these two income brackets was 1.4mn and 3.1mn respectively in FY96. These income categories grew at a CAGR of 17% and 15% between FY93 and FY96. If we assume, that the growth rate in the last two categories falls by half to 8.5% and 7.5% respectively, then the number of households affording a new car will go up to 2.1mn and those able to afford a used car will go up to 4.4mn.

128

Price (Rs) 240,000 110,000

Car finance 180,000 0

Down payment 60,000 110,000

Annual installment outflow 54,036 0

Fuel cost(@10,000 kms/year) 20,770 24,570

Maintenance 6,500 10,500

Total annual outflow 81,306 35,070

Annual saving for down payment 9,446 17,317

Total outflow (Rs) 90,752 52,387

Annual income at 35% outflow 259,291 149,677

Income bracket (Rs) < 260,000 < 150,000

No. of households in FY93 (mn) 0.9 2.0

No. of households in FY96 (mn) 1.4 3.1

Estimated growth (%) 8.5 7.5

Estimated no. of households in FY01 (mn) 2.1 4.4

Note: The car is a Maruti 800 (AC). The used car is of 1996 vintage. Finance scheme is of Maruti Countrywide.

As and when the prices of second hand passenger cars drop, a larger number of households will become eligible for owning a car. For example, if prices come down to around Rs75,000 levels, then a further 1mn households will become potential customers.

In March 1998, according to ACMA, the estimated number of registered passenger cars was 3.87mn. So one can gauge the potential for car sales, which exist in this country at present. Coupled with it the fact that several financial institutions have come to offer car loans, which have been lapped up by potential customers.

However, the household penetration technique has three limitations.

Firstly, the threshold income level for a household to own a car is unclear. In addition, in the context of an economy, where nearly one-third of economic activity is unaccounted, there are no precise estimates of household incomes which factor in black money.

129

Secondly, there are no estimates available about the pattern of car ownership, in terms of the number of cars per household. This aspect has a significant impact on demand estimate for luxury cars as such buyers normally upgrade their cars.

Thirdly, the validity of the household penetration technique is debatable given that corporate institutional buyers account for a significant proportion of total car demand

July Flash - August 3rd, 2000

In July 2000, the passenger car segment has registered a 16.5%yoy decline in sales to 45,109 vehicles from 52,564 vehicles in July 1999. The decline in sales was led by Maruti Udyog Ltd (MUL), whose sales dropped by 28.4%yoy to 26,797 vehicles during the month. However, this represented a 84% growth over its previous month’s sales of 14,543 vehicles. Also its market share has risen to 60% from 41% in the previous month. The growth was mainly driven by the economy size segment, with Maruti 800 and Omni together recording a total sales of 18,830 vehicles, followed by Zen and Wagon-R with combined sales of 6,552 vehicles. Also the luxury models Esteem and Baleno did well with total sales of 1,415 vehicles. However, this growth figures should be seen in the context that MUL underwent a 15 day shutdown for maintenance purposes during June 2000.

Hyundai Motors India Limited has sold 7,265 vehicles in July 2000, as compared to 6,116 vehicles in June 2000, thus recording a 19%mom growth in sales. The company has also posted a 54%yoy jump in sales over its corresponding period last year. Of this, Hyundai’s small car Santro has clocked sales of 5,464 units while its mid sized car Accent has recorded sales of 1,451 units. The company is looking forward to achieve a 15% to 20% jump in turnover during the current fiscal.

General Motors has recorded a robust 196%yoy growth in sales to 648 vehicles in July 2000 from 219 vehicles in the corresponding period of the previous year. Of this, Opel Astra and Opel Corsa accounted for 224 units and 424 units respectively. During the April-July period, the company’s sales have gone up by 186%yoy to 2,384 vehicles from 833 vehicles in the corresponding period last year. In June the company had sold 401 units of Opel Corsa and 202 units of Opel Astra.

130

Contrary to the above performances, Honda Siel sales dropped by 28.7%yoy for the month of July 2000. Honda sold 606 units in July 2000 against 850 units in the corresponding period last year. However, when the accumulated figure of the April – July period is considered, the company has recorded a 11%yoy growth in sales to 3,233 units from 2,914 units in the same month of the previous year. The story is the same for Fiat India too. The company posted a fall of 10.6%yoy in volume sales to 1,330 units in July 2000. The company sold 1,012 units of its 'Uno' model and 318 units of its 'Siena' model during the month. Another player in the mid-sized segment, Ford India, has posted a fall in sales in July as compared to last month. The firm sold 1,502 units of its 'Ikon' model as compared to 1,728 units last month.

June update - July 27th, 2000

Table 1: Volume sales of passenger cars

Company Jun-00 Jun-99 %yoy Apr-Jun-00 Apr-Jun-99 %yoy

Daewoo Motors 4,702 2,584 82.0 15,802 5,839 170.6

Ford India 1,728 288 500.0 4,912 633 676.0

General Motors 603 230 162.2 1,736 612 183.7

Hindustan Motors 2,123 1,973 7.6 5,736 5,661 1.3

Honda Siel 801 750 6.8 2,627 2,064 27.3

Hyundai Motors 6,146 4,634 32.6 21,012 12,684 65.7

Fiat India 830 1,555 (46.6) 3,122 4,636 (32.7)

Maruti Udyog 15,898 24,100 (34.0) 73,447 89,131 (17.6)

131

Mercedes-Benz 47 42 11.9 172 262 (34.4)

Premier Automobiles

0 0 - 0 60 (100.0)

Telco 4,096 3,657 12.0 14,500 7,830 85.2

Total 36,974 39,813 (7.1) 143,066 129,412 10.6

Is the euphoria of FY2000 over? It would seem so if the June figures are anything to go by. As expected, the passenger car industry went through a rough period during the month of June 2000. The reason could be directly attributed to the recent implementation of the uniform sales tax rate of 12% across the country. Market leader Maruti Udyog Ltd (MUL) has posted a fall of 34%yoy in sales in June. The company would like to argue that this has something to do with the 15 day long maintenance shutdown in the company's plant. However, the figures for the first quarter also does not add up to anything substantial. Sales are down 17.6%yoy. However, the company has just about managed to maintain its lead in the higher end of the small car segment. During the first three months of FY01, it sold 16,822 units of its Zen model as compared to 16,465 units of Hyundai Santro and 14,836 models of Daewoo Matiz. (Daewoo's plant was also closed for a 7 day period for maintenance purposes) Following them is Tata's Indica with sales of 14,383 units. Sales of MUL's other model - WagonR - has touched 5.765 units for the quarter. Among the losers, is Fiat Uno whose sales have consistently fallen on a month to month basis. 

Table 2: Volume sales of economy sized cars

Model Apr-00 May-00 Jun-00 Total

Maruti 800 13,596 11,133 5,298 30,027

Maruti Zen 6,335 6,515 3,972 16,822

132

Maruti Omni 6,081 4,517 3,270 13,868

Maruti Wagon R

2,364 2,221 1,180 5,765

Hyundai Santro

5,603 5,851 5,011 16,465

Daewoo Matiz 4,522 5,830 4,484 14,836

Tata Indica 5,145 5,153 4,085 14,383

Fiat Uno 1,007 901 675 2,583

Total 46,661 44,297 27,975 118,933

In the mid-sized car segment, Ford's Ikon was the market leader with sales of 5,017 units. Following it closely was Hyundai Accent with sales of 4,517 units. In fact, sales of Accent was more than that of Ikon's in the first two months of FY01. However, in June, when all companies faced the brunt of depressed demand, Ikon sales continued to go up. MUL's Esteem has clearly lost its numero uno position and sold only 2,864 units. It's other model Baleno has not enthused the market and sales of the model have fallen from month to month this year. For General Motors India, its Corsa model has given it something to cheer about. Sales have been rising since April 2000 and the recent move to lower the price of its higher end 1.6 liter Opel Corsa by 7% or Rs49,000 will make it more competitively priced at Rs636,000 (ex-showroom Delhi). However, GM's older model - Astra - continues to languish. Yet another model to face a poor market is Fiat's Siena. Clearly, the recent decision to lower its price has not had the required effect and it has more or less been nullified by the rise in sales tax. Honda Siel's sales have also dropped on a month-to-month basis in the first quarter of FY01.     

Table 3: Volume sales of mid-sized cars

Model Apr-00 May-00 Jun-00 Total

133

Maruti Esteem 1,160 948 756 2,864

Maruti Baleno 667 386 239 1,292

Maruti 1000 5 - - 5

Ford Ikon 1,592 1,697 1,728 5,017

Hyundai Accent 1,702 1,710 1,105 4,517

Opel Astra 238 210 202 650

Opel Corsa 335 350 401 1,086

Daewoo Cielo 165 203 218 586

Fiat Siena 184 201 153 538

Mitsubishi Lancer 550 760 750 2,060

Honda City 923 903 801 2,627

Mercedes Benz 60 60 47 167

Total 7,581 7,428 6,400 21,409

Source: Auto Car India

Table 4: Volume sales of multi-utility vehicles

Company Jun-00 Jun-99 %yoyApr-Jun-

00Apr-Jun-99 %yoy

M & M 4,292 5,257 (18.4) 13,712 15,714 (12.7)

134

Telco 2,480 2,453 1.1 7,091 6,537 8.5

Maruti Udyog

246 418 (41.1) 533 1,491 (64.3)

Bajaj Tempo

285 429 (33.6) 1,012 1,458 (30.6)

Hindustan Motors

190 182 4.4 476 625 (23.8)

Toyota Kirloskar

2,278 0 - 5,377 0 -

Total 9,771 8,739 11.8 28,201 25,825 9.2

If the story in the MUV segment can be defined in only one word, it is 'QUALIS'. Sans this vehicle, the segment may have well posted a negative growth. Just within the first six months of its entry in the country, the company has succeeded in producing its 10,000 vehicle. It seems that the initial verdict about the model's 'boxy' looks did not hold water for long? Buyers who are going in for the vehicle swear by its driving comfort and overall look and 'feel'. For many, a Toyota Qualis has as much brand value as a Honda City and Mitsubishi Lancer and also falls within a broader price range. Feeling the heat is the market leader M & M. It has seen its sales fall every month in FY01.   

The only other player to remain in positive territory is Telco. It has recently introduced six new versions of its 'Sumo' model. Each one of these models cater to various segments. One of them is called the 'Spacio'. It is priced competitively and comes with a  direct injection diesel engine. This would make it a favorite in the semi-urban and rural areas as running costs would also be low. Sumo's deluxe version has also been upgraded to match the Qualis. The strategy appears to have paid off as the sales figures of 'Sumo' would seem to suggest. Sales of this model has risen by 18.5%yoy to 5,607 units during the three month period. On the other hand, sales of 'Safari' and 'Sierra' have posted a negative growth. To counter this, Telco has planned to launch a refurbished 'Sierra' and a cheaper version of the 'Safari'.

135

    

May 2000 update - June 28th, 2000

Table 1: Volume sales of passenger cars

Company May-00 May-99 %yoyApr-May-

00Apr-May-

99%yoy

Daewoo Motors 6,033 2,250 168.1 11,100 3,255 241.0

Ford India 1,592 180 784.4 3,184 345 822.9

General Motors 560 180 211.1 1,133 382 196.6

Hindustan Motors 2,054 1,819 12.9 3,613 3,688 (2.0)

Honda Siel 903 726 24.4 1,826 1,314 39.0

Hyundai Motors 7,561 4,519 67.3 14,866 8,050 84.7

Fiat India 1,101 1,614 (31.8) 2,292 3,081 (25.6)

Maruti Udyog 27,533 33,680 (18.3) 57,549 65,031 (11.5)

Mercedes-Benz 63 151 (58.3) 125 220 (43.2)

Premier Automobiles

- 17 - - 60 (100.0)

Telco 5,193 2,430 113.7 10,404 4,173 149.3

Total 52,593 47,566 10.6 106,092 89,599 18.4

The story for May continues to be discouraging for the passenger car industry. Sales have been affected in the later half of the month mainly because of rise in prices effected due to the uniform sales tax regime. Market leader Maruti

136

Udyog Ltd (MUL) has been affected the most as its major market of Delhi and surrounding areas saw a rise in sales tax from 6% to 12%. The company has reported a sales drop of 18.3%yoy. The fall was mainly due to lower sales of its Maruti 800 model. 11,137 units of Maruti 800 were sold as compared to 16,854 units last year. The Maruti 'Omni' also did not fare any better. Sales were 4,557 units as compared to 6,977 units in May 1999. However, the Maruti 'Zen' continues to top its segment with 6,516 units sold as compared to 7,030 units in May 1999. The 'WagonR' has also picked up with sales of  2,221 units. In the same segment, Hyundai Motor sold 5,851 units of its 'Santro' model and the other player, Daewoo Motors, sold 5,830 units of 'Matiz'.

Action continued in the mid-sized car segment. May sales in this segment constituted 14.6% of total car sales, up by 6% since August 1999. But here too, Maruti's Esteem continues to fall behind in the competition. The space left by MUL has come to be occupied by the 'Ikon's and Accent's. (Read our article - Big is beautiful) As against sales of 948 units, Hyundai sold 1,710 Accent's and Ford sold 1,697 units of its Ikon model. Honda Siel Cars Ltd has sold 903 cars during the month as compared to 726 models in the corresponding period last year. The news was not good for Fiat too. Fiat sold 1,101 cars during the month as compared to 1,614 units last year. This would indicate that the recent price cut on the company's 'Siena' model hasn't worked out. Daewoo's 'Nexia' and 'Cielo' models trailed behind with just 203 models. 

During the month, MUL also announced its results for FY2000. As expected, turnover growth at 18.2%yoy to Rs96.7bn was good due to higher volume sales. However, net profit has dipped by a large 36.7%yoy to Rs3.3bn. The appreciation in the value of yen against the dollar by more than 12% during the year resulting in increased material cost, higher depreciation burden arising out of investments of more than Rs18bn made by the company in last two years on expansion and introduction on new models and the full year impact of the downward revision in prices effected on January 1, 1999 resulted in profits for the yearbeing lower as compared to last year.

Table 1: Car sales in May 2000

Economy segment May-00 May-99 %yoy

137

Maruti 800 11,133 16,854 (33.9)

Maruti Zen 6,515 7,030 (7.3)

Maruti Omni 4,517 6,977 (35.3)

Maruti Wagon R 2,221 0 -

Hyundia Santro 5,851 4,519 29.5

Tata Indica 5,153 2,365 117.9

Daewoo Matiz 5,830 1,999 191.6

HM Ambassador 1,275 1,251 1.9

Fiat Uno 901 1,365 (34.0)

PAL Padmini 0 17 (100.0)

PAL-Peugeot 118NE 0 22 -

Total 43396 42399 2.4

Mid-sized/Luxury segment      

Maruti Esteem 948 1,455 (34.8)

Maruti Baleno 386 0 -

Honda City 903 721 25.2

Mitsubishi Lancer 760 671 13.3

Fiat Siena 201 254 (20.9)

138

Daewoo Cielo 203 250 (18.8)

Ford Escort 0 200 (100.0)

Ford Ikon 1,697 0 -

Opel Astra 210 180 16.7

Opel Corsa 350 0 -

Hyundai Accent 1,710 0 -

Maruti 1000 0 41 (100.0)

M-Benz E-class 60 31 93.5

HM Contessa 19 15 26.7

Tata Estate 0 2 (100.0)

Total 7,447 3,820 94.9

Grand Total 50,843 46,219 10.0

Source: Auto Car magazine

Table 2: Volume sales of multi-utility vehicles

Company May-00 May-99 %yoyApr-

May-00Apr-

May-99%yoy

M & M 4,995 5,192 (3.8) 9,420 10,457 (9.9)

Telco 2,485 2,282 8.9 4,611 4,084 12.9

139

Maruti Udyog 119 442 (73.1) 287 1,073 (73.3)

Bajaj Tempo 335 547 (38.8) 727 1,029 (29.3)

Hindustan Motors 168 220 (23.6) 286 443 (35.4)

Toyota Kirloskar 2,029 0 - 3,099 0 -

Total 10,131 8,683 16.7 18,430 17,086 7.9

Similar to what has taken place in the mid-sized passenger car segment, growth in the utility vehicle segment during the first two-months of FY01 has been entirely due to sales of one model, namely Toyota's Qualis. All other players, except Telco, have seen their sales fall during the two month period. The highest fall has been that of Maruti Udyog, perhaps, due to the fact that it has got no new orders from the government. Sales of Bajaj Tempo was affected due to a labor strike during the month   and the ensuing loss of production.

Market leader M & M's fall in sales could be due to the fact that it has started feeling the heat of competition from its closest rival Telco. The latter has recently introduced six new versions of its 'Sumo' model. Each one of these models cater to various segments. One of them is called the 'Spacio'. It is priced competitively and comes with a  direct injection diesel engine. This would make it a favorite in the semi-urban and rural areas as running costs would also be low. Sumo's deluxe version has also been upgraded to match the Qualis. The strategy appears to have paid off as the sales figures of 'Sumo' would seem to suggest. During the first two months of FY01, Sumo's sales have increased by 25%yoy to 3,584 units. On the other hand, sales of 'Safari' and 'Sierra' have posted a negative growth. To counter this, Telco has planned to launch a refurbished 'Sierra' and a cheaper version of the 'Safari'.

140

RESEARCHAND

DEVELOPMNT

CHAPTER - 7 RESEARCH AND DEVELOPMENT ANALYSIS

141

Research and Development Process of Maruti Suzuki India Limited Company are done by the company to promote its business and to gain high percentage of market share in the automobile market ,and also to satisfy their customers and attract more customers towards them in the market . The company continuosly do research on their product,market and customers demand to satisfy the customer and to provide them better service.Maruti company has taken various steps regarding the development of the company and also to maintain good relation with customer.Maruti company provide many services to their customers like Insurance,Finance for their vehcles on easy Interest Rates,Genuine acessories for the cars,and maintainance and service related to their vehcles in the workshop. Maruti company have many service stations in different cities to provide easily after sales services to their customer .

Maruti company provide many facilities to their customers through their Dealers ,the customers should do only to reach at the nearest Dealer of Maruti Company and they can easily get every facility which is given by Maruti to their customers.

The following are some reserch process done by the company :

(i)-Crises in ancillary units hit major car makers

Major business houses, including the Tatas and Mahindras, have been hit hard due to the crisis in their ancillary units, which are reeling under rising raw material and power costs. Small and medium industrial units here are supplying spare parts and various components to industrial majors like Tatas, Larsen and Toubro, Mahindra and Mahindra, Crompton Greaves, and the Kirloskars.

However, as these units here, mainly at the Gokulshirgaon industrial estate, are facing a crisis due to raw material costs, the big companies are compelled to modify their production schedule and rate structure. The ancillary units here say that while globalization has increased the scope for quality casting, the scarcity of raw material at affordable prices and lack of power supply on subsidised rates have hit them hard.

142

B S Parvate-Patil, president of the Gokulshiragaon Manufacturers Association (GMA), points out that "if small and medium industrial units in and around Kolhapur are to be encouraged in view of national and global market requirements, special provisions have to be made to provide raw material at reasonable rates. Also, a hike in power tariff should be duly checked."

"Coal from China for instance is available in better quality and at cheap rates. But the coal supplied by state-owned companies in the domestic market is not affordable and lacks quality. This situation has to be changed," he said.

He added that the demand for spare parts and quality castings in global market is on high mostly because developed countries are now concentrating more on checking pollution and hence are reluctant to encourage ancillaries in their countries.

"While developing countries should take advantage of this situation, both the government and the concerned organisations should come forward to sort out the crisis being faced by ancillaries in the small and medium sector," Parvate-Patil said.

(ii)-Rising input costs, price control haunt small cement players:

The Rs 85,000-crore domestic cement industry will have to move towards consolidation as rising input costs and price controls squeeze profits, rendering the small cement manufacturers unviable.

"Smaller players will either have to merge with larger companies or they will be taken away by foreign firms," said R C Gupta, president, Mangalam Cement, part of the B K Birla group. In the short-term, it might be a setback for the industry, but in the long-term it would augur well, he added.

French company Vicat SA today bought a 6.67 per cent stake in Sagar Cements for Rs 700 a share, showcasing the vulnerability of the highly fractured industry, which has more than 50 players - mostly small and marginal.

According to a source in one of the leading multinational cement companies having its operations in India, "In an intense competitive scenario, smaller

143

players cannot tolerate the pressure of rising input costs on all fronts and cannot increase cement prices. Either they will sell off their business for good prices or they will be shut down."

Already, six foreign firms - Holcim, Lafarge, Heidelberg, Italicementi, Cimpor and DCH - have operations in the country. Industry players said it is difficult for small cement players to survive in such a competitive environment.

Kamakhya Chamaria, managing director, Barak Valley Cements, said, "Deals similar to that of Vicat- Sagar Cements will continue to happen. If any foreign company approaches us, we will have to see the benefits we will get before taking any decision."

Already, six foreign firms - Holcim, Lafarge, Heidelberg, Italicementi, Cimpor and DCH - have operations in the country. Industry players said it is difficult for small cement players to survive in such a competitive environment.

Kamakhya Chamaria, managing director, Barak Valley Cements, said, "Deals similar to that of Vicat- Sagar Cements will continue to happen. If any foreign company approaches us, we will have to see the benefits we will get before taking any decision."

He added that a few years ago, a foreign firm had signed an MoU with Barak Valley, "but the deal did not go ahead". He said that at present no foreign cement company has approached the firm.

Top officials of smaller cement firms acknowledged the fact that more consolidation in the industry is on the cards. "If one gets benefits in such deals and have no other option, then what can be done? Selling will be the only way out," said an official of another small cement firm.

Sagar shares closed at Rs 388.10, a gain of 3.2 per cent over the previous close of Rs 376.05 on the Bombay Stock Exchange.

(iii)-Inventories pile up as auto firms hit a bump

144

After a healthy run in the last couple of months, the auto industry is heading for a slowdown, causing a rise in vehicle inventory levels. This may put put pressure on companies as well as local dealerships.

However, the situation may benefit vehicle buyers as auto companies resort to cash discounts on purchases or attractive sales promotion schemes such as freebies and extended warranty offers to clear the stock pile of vehicles.

According to Mumbai-based auto analysts and dealers, cars are currently carrying an average inventory of about 25 days while two-wheelers are 20-25 days. Usually, cars carry an inventory of 12-15 days while two-wheelers have an inventory level of 10-15 days.

Although the term inventory is used for semi or partly finished goods, it also explains completely finished goods, which are ready for sale.

Possessing a high amount of (finished) inventory for long period of time is bad for the business because of obsolescence and spoilage costs, say experts.

"If the demand is higher, the flow (from manufacturing to retail sales) is much smoother. However, that only happens in popular models", said an auto expert.

Maruti has one of the lowest inventory levels in the industry, while Tata Motors is among the highest. Tata Motors, in its latest presentation, had said that its inventory levels were at 22 days.

"As the industry is heading for a slowdown, we are going to see a considerable rise in inventory levels. Due to lack of any product excitement, people are not willing to pay for models, which look outdated. Retail dispatches have declined in the last few months," said another analyst with a Mumbai-based brokerage firm.

The two-wheeler industry, too, is facing a mild increase in inventory levels at 20-25 days this year as compared to last year when sales of motorcycles had fallen by almost 12 per cent. Inventory levels had reached 45-50 days last year.

Normally, inventory levels for two-wheelers are expected to be 10-15 days. H S Goindi, head, sales and marketing, TVS Motors, said, "We have a

145

comfortable level of inventory currently, much better than what the industry saw last year."

Decreasing price-elasticity (since bike sales are price sensitive and sometimes driven by incentives) and lack of any significant launch by industry majors, such as Bajaj Auto and TVS Motors, may push inventory to higher levels, say industry officials.

A dealer, who does not wish to be identified, said, "Sales had fortunately picked up in the last two months, however, the current month is almost flat. If the sales do not rise again, we may face a high inventory."

(iv)-India to have surplus steel output by FY12: Paswan

India's steel production is likely to surpass the domestic requirement by 2011-12, easing pressure on prices of the alloy, which has been adding to the spiralling inflation.

"We shall achieve 124 million tonnes steel capacity by 2011-12, well exceeding the requirement that would be about 110 million tonnes at that point of time," Steel Minister Ram Vilas Paswan said.

Steel prices shot up by over 50 per cent since January, adding to the woes of the UPA government, which is battling a seven-year high inflation of 8.75 per cent in its last year.

The annual demand for steel in India has been rising by about 13 per cent, but production is growing by over 6 per cent, according to official sources.

In the last financial year, the country's crude steel production stood at 53.9 million tonnes, of which about 5 million tonnes were exported. To bridge the demand-supply mismatch, India had to import nearly 7 million tonnes of steel.

Steel Secretary R S Pandey, while saying that India became a net steel importer from being a net exporter till a few years ago, said the trend is likely

146

to continue for sometime as increase in capacity takes at least three to four years.

As per official figures, the country's finished steel import went up by over 300 per cent from 1.6 million tonnes in 2002-03 to nearly 7 million tonnes in 2007-08 (provisional).

In view of the growing demand, the government plans to scale up steel production to over 290 million tonnes by 2020. It has also envisaged that the sector will see an investment of Rs 8,70,640 crore by that time.

Going by an estimate of Rs 4,000-crore outlay per million tonne of additional capacity, an investment of Rs 2,76,000 crore is likely by 2012 and Rs 8,70,000 crore by 2020.

As of now, both domestic and foreign steel players have signed 193 memoranda of understanding with states for setting up new units with a total planned capacity of around 243 million tons and a total proposed investment of over Rs 5,14,000 crore.

Private and public sector steel companies have also embarked on capacity expansion. Steel Authority of India Limited plans to take up its hot metal production to 26.13 million tons by 2010 from the present 12.84 million tons. Private steel majors including Tata, JSPL, Ispat and JSW Steel have also lined up expansion of their existing production strength.

RESEARCH AND DEVELPOMENT IN MARUTI:

New Technology - Absorption, Adaptation and Innovation

147

The company is working towards localization, development and testing of products - both new and existing. This would help in indegenisation of various vehicle aggregates at lower costs. The launch of Zen Estilo, launched with a localization of 94.2% is a case in point.

Capabilities strengthened in component and vehicle evaluation, benchmarking and design optimization will further improve and upgrade existing models for comfort, style and value for money.

Alternative fuels like CNG, LPG, which could help make environmentally friendly vehicles are being worked upon.

Global Sourcing and advanced sourcing get advanced technologies into India at lower costs.

148

KEY STAFF

CHAPTER - 8 KEY STAFF

149

(a)-Managerial Hierarchy RKBK Automobiles Ltd

↓

Director & CEO --------- Mr. K.P.Poddar

↓

General Manager ---------- Mr.S.K.Thompson

↓

Human Resourse Manager ----- Mr.Sanjay Pathak

↓

Team Leader-1

Mr.Santosh Singh

Team Leader-2

Mr.Sujeet Singh

↓

Sales Executive (SE) [ 4 sales executive under 1 Team leader]

↓

Rural Development (RDSE) [ 3 RDSE under 1 Sales executive ]

WORKSHOP MANAGER

Mr.Nasir Ali Khan

↓

Managing Director ----------- Mr.B.K.Poddar

Manager sales Spares

Customer Care Manager

WorkshopManager Accounting

ManagerTrueValue

150

Service Advisor/

Supervisor

Pre-deliveryInspection(PDI)

Accidental Unit

CustomerManager

Mr.C.Moitra

Back Office

↓ ↓

Mechanic Customer Care Manager

↓

Mechanic

↓

Jr.Mechanic

↓

Electrician

↓

Denter/Painter

TRUE VALUE MANAGER

Mr.R.K.Tiwari

↓

151

Evaluater’s

Executive

Sales Executive

Back Office Staff

A/C Department

↓

Sr.Manager A/c

Mr.K.N.Ojha

↓

A/C Manager

↓

Executive A/C Manager

(b)-Duties and Responsibilities of the Staff

The duties and responsibilities of the staff of the dealer RKBK Automobiles ltd is

152

To sale maximum vehcles .

To maintain all the a/c with honesty.

To create healthy environment in the organisation.

To co-oporate with each other in the organisation.

To maintain good relation with the customers.

To be in the office at right time.

To provide all the facilities and services to the customers which are given by Maruti Company to their customer.

To complete the target of selling cars of dealers.

153

HR POLICIES

CHAPTER - 9 H R POLICIES

This policies manual has been designed to provide us with information

regarding the terms, conditions, benefits & programs that the organizations

154

offers, as well as the policies & procedures that govern day to day activities

and conduct an organizations.This policy manual applies to all staff members

of Maruti Suzuki India limited.

HR VISION

Lead and Facilitate continuous change towards organizational excellence ; create a learning and vibrant organisation with high sense of pride amongst its members.

(i)CULTURE BUILDING INITIATIVES SINCE INCEPTION

Japanese Management philosophy of Team Spirit

Common uniform Open office Common Canteen Open Office – Easy accessibility, Speedy Communication and

decision making Morning Meetings Morning Exercises

(ii)-FOCUS OF EFFECTIVE MANAGENENT PROCESSSINCE INCEPTION

# Management Committee Meetings – every Tuesday

# Single unaffiliated Union

# Excellent Industrial Relations scenario – no loss of mandays due to strike/lockout etc. in past 5 yrs.

155

# Maruti Udyog Sahyog Samiti – a forum for Non-Unionised Staff

# Delayered Organisation Structure Workers(Techn. / Asst.), Supervisors,Executives, Managers

# Top Driven HR – MD is also Director HR

# HR’s role of a facilitator

# Line managers as HR Managers

# Year of the Customer – HR Internal Customer Focus

# Focus on Internal & External Customer

(iii)- HR INITIATIVES

# Prepare MUL Strategic Business Plan-2000-2003; To achieve the Vision & Goal# Improve the performance Appraisal system - it’s process, skill & usage

# Introduce a Potential Appraisal System

# Improvements in internal & external Training & it’s effective utilisation. Training need identification

# Systematic career planning ; Job Rotation ; Empowerment; Job enrichment

# Periodic communication meeting at various level; Roll out of Vision

# Raise cost consciousness for cost control and reduction

# Exposure on Brand Strategy to all non- marketing staff

# Retention of Talent

156

(iv)-INDUCTION & SUCCESSION

# Transparent Recruitment & Selection process

# Recruitment on an All India Basis – no sectoral orregion specific

# Recruitment of Best available Talent in the Country

Engineers – CAMPUS - IITs/RECs/Rorkee/HBTI ALL-INDIA TEST MBAs – IIMs/XLRI CAs - Rank Holders Technicians - ITI’s diploma holders after All India Exam &

Apprenticeship In MUL Lateral Entry for Experienced Professionals SUCCESSION

PLANNING Potential & Performance Vacancy - based

(v)- TRAINING & DEVELOPMENT

Annual Training Plan - All Levels Training customised to meet Organisational Objectives Topics selected based on Vision, Values & Departmental Feedback of

Company-wide Managers Competency Mapping to identify Individual Training Needs Technical Training on latest Technologies abroad at SMC, Japan STRONG FUCUS ON TRAINING INITIATIVES

1. Build a Learning Organisation2. Continuous Value Additions to Professional Skills3. Customised Training4. Training to the personnel of Business Partners

157

(vi)-OVERSEAS TRAINING

Training held in co-ordination with SMC, Japan and AOTS (Assoc. for Overseas Tech. Scholarship)(covered 1600 employees under the various schemes)

6 months SMC Training for Technicians- OJT in SMC, Japan (2 batches/yr of 50 each)

9 months Javada Training for Press, Tool & Die Specialists - Design & Maintenance

AOTS Managerial Training (4-10weeks) for Manager & above - Managerial Best Practices

AOTS Technical Training (3.5 to 6 months) for Supervisors & above - Technological Knowhow

R & D Training (2 yrs.) - Research on new Technologies

(vii)-APPRAISAL & REWARD

APPRAISAL

# New Appraisal System based on KRAs & Targets# Review of Targets at regular Intervals# People Development an important KRA

REWARD

# Promotions based on Performance# Productivity & Profit-linked Incentive Schemes# Training including Long-term SMC Japan Trg.# Highest paid workforce in the Industry, if not the Country

(viii)-LEADERSHIP

Vision, Value & Team Building Workshops for Top Management CFT (Cross Functional Teams) of Managers for Major Thrust Areas

158

Managers sent to Joint Ventures to upgrade their practices to MUL standards

(ix)-CAREER DESIGN

Performance & Potential based Appraisals Fast Track Option for High-performers Promotions after Managers Vacancy based Interviews for promotions above Managers Selection of Supervisors:

1. Performance / Attendance / Discipline record2. Written Test & Interview

Job Rotation - including Inter-functional

(x)-OUTSOURCING HR

Part of our Long-term Strategic Plan Currently Trainers hired from outside

(xi)-RETENTION & EMPLOYEE WELFARE

# Employee Welfare1. Residential Colonies for Employees – Chakkarpur & Bhondsi2. Hospitalisation Reimbursement – on actuals without Ceiling3. Vehicle Loans4. Household Equipment Loans5. House Building Advance6. Annual Advance

# MUL PF Trust – for better Mgt., Service & speedy redress# Proposed MUL Pension Scheme# Learning Opportunity - Benchmark in Auto Technology# Professional Value addition through Training# Opportunity for foreign training at SMC, Japan# Job Rotation & Job enrichment

159

(xii)-EMPLOYEE ENGAGEMENT –ESOPs

Maruti Udyog Ltd. Employees Mutual Benefit Fund Scheme Managed by a 10-member Trust Fixed Equity of 0.26% Lock-in period of 3 years Transferable Internally

(xiii)-SUGGESTION SCHEME & QUALITY CIRCLES

For better quality and productivity Through involvement of all employees and teamwork During the year 1999-2000 :-

1. Suggestions Implemented - 52,0542. Cost Saving (in crores) - Rs. 131.69 Crores3. Number of QC Groups - 5104. QC Meetings held – 7189

Target for SS & QC for 2000-01:

Suggestions Implemented - Prod. & VI - 1implmented/employee/monthOther areas - 8.4 implemented/employee/monthCost Saving Rs. 165 crores (25%)increase for the CompanyQC Meeting - 13 meetings/QC Gp./ YearTarget - 34 marks / suggestion

Company-wide QC Groups (8-15 members per group)

Monthly QC Meetings on the First Wednesday each Month Company-wide QC Competitions - Best Team sent to SMC MD’s lunch with Best QC Team & Best Suggestion Winner SUGGESTION MERIT EVALUATION : 5 LEVELS (A to E) Criteria

- Cost Saving (per annum/one time)

1. Ingenuity of Suggestion (depth of study)2. Applicability (in work area/entire plant)

160

SUGGESTIONS : Monetary Reward Criteria - Idea1. Efforts2. Result : Cost reduction / Q Improvement / Productivity Improvement

(xiv)-FUTURE CHALLENGES - HR INITIATIVES

Realigning organization culture based on new vision & values. Objective performance management & development based. Transparent job rotation & job enrichment. Performance linked reward and recognition system. CAREER PLANNING & PROMOTION POLICY Revised recruitment policy. Competency mapping. Strong fucus on training initiatives.

1. Build a learning organization.2. Continuous value addition to professional skill.3. Customised training.4. Training to the perssonel of business parteners.5. Internal communication.

Union alignment. Employee involvement & participation.

(xv)-H.R policies generally consist of:

1. Working Hours

2. Working beyond office hours & on holidays

3. Local conveyance policy

4. Domestic travel policy

5. International travel policy:

1 Privilege leave

161

2 Sick leave

3 Maternity leave

4 Adoption leave

5 Paternity leave

6 Leave without pay

6. Company leased accommodation

7. Transfer Policy

8. Relocation policy for new joinees

9. Employee referral policy

1. Working hours:

# Corporate office: Monday to Friday 9.15 to 17.45 hrs

# Branch office : Monday to Friday 9.15 to 17.45 hrs

Saturday 9.15 to 13.30 hrs

Working beyond office hours & on holidays : Staff members may be at times required to work beyond office hrs. in such circumstances company will reimburse certain expenses as mention below :

1 Working beyond 21.00 hrs on working days and

2 Working beyond 18.00 hrs on Non-working days/ public holidays.

3.Domestic travel policy: Objective is to articulate guidelines forbusiness related travel within India. All staff member are eligible for this policy.

4. International travel policy:

1 The objective is to articulate guidelines for international travel

162

2 All staff member are eligible

5. Leave policy:

1 The objective is to articulate guidelines for the staff members to

manage their leave as per the services regulations of the organization.

2 All staff members are eligible for privilege leave.

3 All married women are eligible for maternity leave.

4 All confirmed women staff members are eligible for adoption leave.

5 All married male staff members are eligible for paternity leave.

6 All staff members are eligible for leave without pay.

6. Company leased accommodation:

The objective is to estabilished for employees availing the company lease benefits.

7. Transfer policy:

The objective of the organization may require moment of people across locations and functions as per business need. The objective of this process is to insure that the staff member receives assistance for his moment and able to settle down smoothly in the new location.

163

MARKETING

POLICIES

CHAPTER -10 MARKETING POLICIES

Maruti Suzuki India Limited company is the biggest Automobile company in Indian Market .It has the highest percentage of market share in the automobile market .The Marketing Policies used by Maruti Company are of different types ,maruti company use different marketing policies to survive on the position which the company has in the market and also to increase their

164

profit by using different strategies of marketing among their competitors in the market.

To know the market policies of Maruti company first we have to classify the car market which are:

Car Market Classification:

Before going further it is necessary to understand the Indian car market classification and the segments in which MUL operates.There are two principal systems of classification in the Indian passenger car industry:

1-Price Based Classification2-Length Based Classification

1- Price Based Classification

Price based classification is the widely accepted classification basis in the Indian passenger car industry.The different price segments used by Maruti were as follows:

1. Segment A – cars priced lower than Rs. 300,0002. Segment B – cars priced between Rs. 300,000 and Rs. 500,0003. Segment C – cars priced between Rs. 500,000 and Rs. 1,000,0004. Segment D – cars priced between Rs. 1,000,000 and Rs. 2,500,0005. Segment E – cars priced above Rs. 2,500,000

2-Length Based Classification:

In April 2002, SIAM introduced a new segmentation of cars on the basis of the length of the cars, in order to establish a uniform industry standard. The new segmentation of passenger vehicles is as follows:

165

1.Passenger cars

• Segment A1 (Mini) – cars having a length up to 3,400mm• Segment A2 (Compact) – cars having a length of 3,401- 4,000mm• Segment A3 (Mid-size) – cars having a length of 4,001- 4,500mm• Segment A4 (Executive)– cars having a length of 4,501- 4,700mm• Segment A5 (Premium) – cars having a length of 4,701- 5,000mm• Segment A6 (Luxury) – cars having a length of more than 5,000mm

2.Utility vehicles

• Weight upto 3.5 tonnes a) Seating capacity not exceeding 7 (including driver) b) Seating capacity between 7 and 9 (including driver)

• Weight up to 5 tonnesa) Seating capacity not exceeding 13 (including driver)

• Multi-purpose vehicles (Weight upto 3.5 tonnes).

Dynamics of Automobiles Market in India :

Initially Maruti was operating in the market which was the part of a closed economy but with the opening of economy market scenario has changed dramatically and is at an interesting juncture where both challenges and opportunities are immense.According to the statistics available, Indian car market is one of Asia's largest and most competitive markets. Over 1,030,068 passenger cars, multi and sports utility vehicles were sold during 2003/04 resulting in the market growth

166

of about 32%.

With such immense growth opportunity the Indian automobile market has finally caught the fancy of big players which are eager to capture the India automobile market at any cost. And as such Maruti is having a tough competition from the new players, including Hyundai, GM and Honda of Japan. In the last quarter of 1998 these new entrants in the market had launched an unprecedented assault on the B segment of the market.

• Daewoo launched the Matiz

• Hyundai launched the Santro. Santro Xing specially created a fresh excitement in the B segment.

• Telco launched the Indica.

• Around the same time, Fiat slashed the prices of its Uno and launched a Diesel variant. Hyundai has also launched Getz.

• General Motors is also planning to launch new variants.

• Fiat has reworked the engine of the Palio and is planning to launch another B segment product.

• And then, there are Honda and Toyota.

• It is also predicted that Honda Motors India will be also launching its small car, Life, in India.Along with the intense competition there are other factors which have made the conditions worse for Maruti.

• After almost 18 years, the 800 is on its last legs. This is particularly important as Tata Motors is serious about an entry-level car at Rs 1 lakh.

• Over the years, MUL's brand value had begun to erode. It is seen as a small-car maker only.

• Maruti was having nothing to offer to the booming market for people carriers in India - Sumo, Qualis, etc. For this segment Maruti launched Versa. Launched as a higher end alternative to the Omni, it wasexpected to click. But the Versa bombed. Launched with sales expectations of

167

a 1,000 units every month,it did about 100.

• The other launch, the Baleno, went up against the Hondas and the Mitsubishis, and lost money from Day One.

• In an industry where cars get minor facelifts every year, a major reworking every two to three years, and are replaced every four or so years, the Zen has remained almost unchanged since 1993.

• It seems that even consumer are having problem equating Maruti with premium.

• Since MUL had exhausted all of Suzuki's high-end products, it is finding itself unable to cope with the frequent upgrades and relaunches.

• Even when the government's stake in Maruti has come down, the interference will not decrease as seen with other institutions like VSNL and MTNL.

• Considering Hyundai's emerging status in the Indian market and the lack of government involvement, it could turn out to be a better pick than Maruti. • Maruti is also facing problems linked to its higher end mid-sized (segment C) models. Maruti's share in this segment has fallen from 30 per cent in 1999-00 to 16 per cent in 2002-03.Maruti currently has three cars in segment C -- Esteem, Versa and the Baleno, of which the latter two have still to make a mark.

• Maruti Suzuki is also having great difficulty in keeping its profit growing as A segment, in which MarutiSuzuki is the only player has margins as low as 1-2% (Rs 2,000 to Rs 4,000 per car).As a result in recent years Maruti Suzuki has been consistently been losing out to other players like Hyundai and Telco in the compact car segment and has been reduced to the marginal player in all segments above B.Talking in terms of absolute figures Maruti Suzuki's share declined from 61.2% in 1999 to 54.6% in 2003 and finally to 51% in 2005. Its volumes have dropped from 3.53 lakh to 3.30 lakh even as total industry volumes (carsand utility vehicles) have shown a compounded annual growth rate of 5.

168

Marketing Policies used by Maruti Company :

Maruti Company uses some theoretical concepts of Marketin Mix which are

Meaning and Definition

Marketing Mix means to collect and mix the resources of marketing in the manner that objects of the enterprise may be achieved and maximum satisfaction may be provided to the consumers. The term marketing mix is used to describe a combination of four elements – the product, price, physical distribution and promotion. These are popularly known as “Four P’s”. A brief description of the four elements of marketing mix (Four P’s) is.

Product : The product itself is the first element. Products most satisfy consumer needs. the management must, first decide the products to be produced, by knowing the needs of the consumers.

Price : The second element to affect the volume of sales is the price. The market or announced amount of money asked from a buyer is known as basic value placed on a product.

Promotion : The product may be known to the consumers. Firms must undertake promotion work-advertising, publicity, personal selling etc. which are the major activities.

Place : Physical distribution is the delivery of products at the rights time and at the right place. The distribution mix is the combination of decisions relating to marketing channels, storage facility, inventory control, location transportation warehousing etc.

169

And for using this marketing mix Maruti Company have to study the consumer buying behaviour which is :

What is Consumer Buying Behaviors?

Definition of Buying Behaviour,

Buying Behaviour is the decision processes and acts of people involved in buying and using products.

Need to understand:

Why consumers make the purchases that they make?

What factors influence consumer purchases?

The changing factors in our society.

Consumer Buying Behaviour refers to the buying behaviour of the ultimate consumer. A firm needs to analyze buying behaviour for:

Buyers' reactions to a firms marketing strategy has a great impact on the firm's success.

The marketing concept stresses that a firm should create a marketing mix(MM) that satisfies (gives utility to) customers, therefore need to analyze the what, where, when and how consumers buy.

Marketers can better predict how consumers will respond to marketing strategies.

170

CONSUMER BEHAVIOR

Consumer behavior is the study of the behavior of consumers, when they go to purchase something to satisfy their needs and wants.

Buying Motives of consumers:

A motive can be defined as a drive or an urge for which an individual seeks satisfaction. It becomes a buying motive when the individual seeks satisfaction through the purchase of something.

Factors Influences Consumer Behavior

Consumer’s behavior is influenced by cultural, social, personal, and psychological factors. Cultural factors exert the broadest and deepest influence.

Cultural Factors : Culture, subculture, and social class are important in buying behavior.

Culture : Culture is the most fundamental determinant of a person’s wants and behavior through his or her family and other key insinuations. A child growing up in the United States is exposed to the following values : achievement and success, activity, efficiency and practicality, progress, material comfort, individualism, freedom, external comfort, humanitarianism and youthfulness.

171

Subculture : Each culture consists of smaller that provide more specific identification and socialization for their members. Subculture include nationalities, religions, racial groups and geographic regions. Many subcultures make up important market segments, and marketers often design products and marketing programs tailored to their needs.

Social Class : Virtually all-human societies exhibit social stratification. Stratification sometimes takes the form of a caste system where the members of different castes are reared for certain roles and cannot change their caste membership.

Social factors : In addition to cultural factors, a consumers behavior is influenced by such social factors as reference groups, family, and social roles and statuses.

Reference Groups : A person’s reference groups consist of all the groups that have a direct (face-to-face) or indirect influence on the person’s attitudes or behavior.

Family : The family is the most important consumer buying organization in society, and it has been researched extensively. Family members constitute the most influential primary reference group. We can distinguish between two families in the buyer’s life.

Roles and Statuses : A person participates in many groups – family, clubs, organizations. The person’s position in each group can be defined in terms of role and status.

Personal Factors

A buyer’s decisions are also influenced by personal characteristics. These include the buyer’s age and stage in the life cycle, occupation, economic circumstances, lifestyle and personality and self-concept.

172

(i)Age and stage in the cycle :

People buy different goods and services over a lifetime. They ear baby food in the early years, most foods in the growing and mature years, and special diets in the later years. Taste in clothes, furniture and recreation is also age related. Consumption is shaped by the family lifecycle. Some recent work has identified psychological life-cycle stages. Marketers pay close attention to changing life circumstances – divorce, widowhood, remarriage – and their effect on consumption behavior.

(ii)Occupation and economic circumstances :

Occupation also influences a person’s consumption pattern. A blue-collar worker will buy clothes, work shoes, and lunchboxs.

(iii)Lifestyle :

People from the same subculture, social class and occupation may lead quite different lifestyles. A lifestyle is the person’s pattern of living in the world as expressed in activities, interests and opinions.

(iv)Personality and self – concept :

Each person has a distinct personality that influences buying behavior.

(v)Psychological Factors :

A person’s buying choices are influenced by four major psychological factors-motivation, perception, learning and beliefs and attitudes.

(vi)Motivation :

A person has many needs at any given time. Some needs are biogenic; they arise from physiological states of tension such as hunger, thirst, discomfort.

(vii)Perception :

A motivated person is ready to act. How the motivated person actually acts is influenced by his or her perception of the situation.

173

(viii)Learning :

When people act, they learn. Learning involves changes in an individual’s behavior arising from experience. Most human behavior is learned. Learning theorists that learning is produced through the interplay of drives, stimuli, cues, responses , and reinforcements.

(ix)Beliefs and Attitudes :

Through doing and acquire beliefs and attitudes. These in turn influence buying behavior. A belief is a descriptive thought that the person holds about something.

Stages of the Consumer Buying Process

Six Stages to the Consumer Buying Decision Process (For complex decisions). Actual purchasing is only one stage of the process. Not all decision processes lead to a purchase. All consumer decisions do not always include all 6 stages, determined by the de2ree of complexity...discussed next. The 6 stages are:

1. Problem Recognition (awareness of need)--difference between the desired state and the actual condition. Deficit in assortment of products. Can be stimulated by the marketer through product information-- I.E., see a commercial for a new pair of shoes, stimulates your recognition that you need a new pair of shoes.

2. Information search-Internal search, memory.

External search if you need more information. Friends and relatives (word of mouth). Marketer dominated sources; comparison shopping; public sources etc.A successful information search leaves a buyer with possible alternatives.

3. Evaluation of Alternatives needs to establish criteria for evaluation, features the buyer wants or does not want. Rank/weight alternatives or resume search. May decide that you want to eat something

174

spicy. If not satisfied with your choices then return to the search phase. Can you think of another alternative? Look in the yellow pages etc. Information from different sources may be treated differently. Marketers try to influence by "framing" alternatives.

4. Purchase decision--Choose buying alternative, includes product, package, store, method of purchase etc.

5. Purchase May differ from decision, time lapse between 4 & 5, product availability.

6. Post-Purchase Evaluation--outcome: Satisfaction or Dissatisfaction. Cognitive Dissonance, have you made the right decision. This can be reduced by warranties, after sales communication etc.

Types of Consumer Buying Behaviour

Types of consumer buying behaviour are determined by:

Level of Involvement in purchase decision. Importance and intensity of interest in a product in a particular situation.

Buyer's level of involvement determines why he/she is motivated to seek information about a certain products and brands but virtually ignores others.

High involvement purchases--Honda Motorbike, high priced goods, products visible to others, and the higher the risk the higher the involvement. Types of risk:

Personal risk

Social risk

Economic risk

175

The four type of consumer buying behaviour are:

Routine Response Programmed Behaviour -- buying low involvement frequently purchased low cost items; need very little search and decision effort; purchased almost automatically. Examples include soft drinks, snack foods, milk etc.

Limited Decision Making buying product occasionally --When you need to obtain information about unfamiliar brand in a familiar product category, perhaps. Requires a moderate amount of time for information gathering. Examples include Clothes know product class but not the brand.

Extensive Decision Making/Complex high involvement, unfamiliar, expensive and/or infrequently bought products. High degree of economic/performance/psychological risk. Examples include cars, homes, computers, and education. Spend a lot of time seeking information and deciding. Information from the companies MM; friends and relatives, store personnel etc.

Go through all six stages of the buying process.

Impulse buying, no conscious planning.

In order to produce successful ads, you must give people exactly what they want. This article will teach you why people buy the things they do so you can design your ads to fulfill these needs.

176

SOME MODELS OF MARUTI SUZUKI INDIA LTD :

MARUTI 800

MARUTI OMNI

177

MARUTI ALTO

MARUTI WAGON –R

178

MARUTI ZIPSY

MARUTI VERSA

179

MARUTI ESTEEM

MARUTI GRAND VITARA

180

MARUTI SWIFT

MARUTI SX4

181

MARUTI ZEN ESTILO

MARUTI SUZUKI ALTO

182

MARUTI SWIFT DEZIRE

MARUTI GRAND VITARA(NewModel)

183

MARUTI ZEN ESTILO

MARUTI SUZUKI SPLASH

184

UPCOMING MODEL OF MARUTI SUZUKI:

Maruti Suzuki Splash

Expected in July 2008Estimated price: 4-6.5 Lakh

Splash all over the place. And I am not talking about some naughty little boy being the brat that he has always been going about his usual business and splashing muddy water everywhere. If all goes well for India’s largest auto-maker, “Splash all over the place” this statement actually can easily come true!

185

Maruti 800 started the bang and the very beloved Zen carried it forward. Wagon-R chipped in well too later on. And now that Zen has already received a make-over in the form of Estilo, it is the turn of her stable-mate, Wagon-R. Suzuki had showcased a concept based on this car in last year’s Paris Motor Show. Since then a lot of surgery has seen the Splash take its final form, the pictured of which we see here.

The styling is bold and is characterised by the massive headlamps at the fron. The rear is a result of some out-of-the-box thinking and has an inward tilt to it, something that the French have always had in their car designs. It does not look very nice, but every person has a right of thinking!

On the inside, you will notice the parts-sharing that Maruti has mastered now. The dash and the centre console shouts SX4 and Swift at its loudest. The rev counter placed on the dashboard is interesting though.

Maruti has ample number of engines to offer this car with. A one-liter, 65bhp motor can be offered while a 1.2L engine developing close to 86PS is also on the cards. The multi-jet diesel engine of the Swift can also be considered.

This car was showcased at the Frankfurt Motor Show and Maruti would be

bringing it in India by mid next year. Fireworks in the automotive sector can

be guaranteed.

Specs (Speculated)Car Segment: Hatchback/Small-car

Fuel Type: Petrol

Engine: 1.0L, 1.2L Petrol/ 1.3L Diesel

Max Power/Torque: Petrol - 65PS/84Nm; 86PS/114Nm, Diesel –

76PS/190Nm

Dimensions in mm (LxWxH): 3720x1780x1650

186

ATTRACTIVE

FEATURES

OF THE

187

COMPANY

CHAPTER-11 ATTRACTIVE FEATURES OF THE

COMPANY

Maruti Suki India Ltd Company is a joint venture of Maruti Udyog Ltd of India and Suzuki Motors of Japan.Maruti company provide many attractive features and after sales services to their customer. The attractive feature of the company is the after sales service which is provided by the company to the customers. Maruti company provide many services to their customers which are :

(a) Sales and Services

(b) Maruti Genuine Parts

(c) Maruti Finance

(d) Maruti Insurance

(e) Maruti True Value

(f) Maruti Driving School

(g) Maruti Auto Card

188

(h) Maruti Dil Se

(i) Extended Warranty

(j) Reaching to their customers

(a)-Maruti Sales and Services

The Maruti Dealerships are the most visible parts of customer focus. Right from the way a prospective customer is welcomed to the dealership to the entire buying experience and the service experience, customers feel very 'invited'.

Its what makes customers loyal to Maruti cars too. Almost 50% of our new car customers are existing

customers. Almost 90% people who trade in their used cars through 'Maruti True Value', finally buy a new Maruti.

For Maruti,customer focus is very important, amply evident from the fact that 'Customer Obsession' is our first core value. We have been chosen by customers as the best car

manufacturer in terms of customer satisfaction seven years in a row in the prestigious J D Power survey.

Wide range of cars

189

We offer 11 models and over 100 variants, ranging from the people's car, Maruti 800, for less than Rs 200,000 ($ 5000) ex-showroom to the premium sedan SX 4 and luxury SUV, Grand Vitara.

The Complete Car Experience

Maruti goes ahead to give the customer a complete car experience - a solution to have all auto needs under a single roof. Allied services like Finance (Maruti Finance), Insurance (Maruti Insurance) and sale, purchase and trade-in of pre owned cars (True Value) help customers have a hasslefree ownership experience.

Network

We have a nationwide footprint in over 1172 cities in India and export to over 100 countries across the globe.

As the Indian economy shifts to higher gear, we believe that maximum reach is a very important factor. In the last year, we have also reached to new customer segments through the NRI - Dil Se Program. Another segment that we targeted was the rural segment through the Panchayat scheme.

Service

Service Quality standards have been one of the most important Kaizens followed at the workshops. Maruti Suzuki has been way ahead of the industry average and has been ranked No.1 in the JD Power Customer Satisfaction Index seven times in a row.

Special Service initiatives for women customers

Maruti offers a special service initiative to women, by picking up the car for service and dropping it off once completed. This is specially helpful to working women who need more time and comes in as a great service. This was a result of one of the communication meetings when the suggestion was put forward and immediately rolled out.

190

(b)-Maruti Genuine Parts

Maruti Suzuki Genuine parts are priced very competitively and offer a customer best value for money and quality. Each product goes through a series of rigorous quality measures and reaches a customer at its best. Many of these items are imported from Suzuki, Japan.

Maruti Genuine Accessories (MGA) offer high quality accessories at competitive prices. Every MGA item has perfect mechanical and electrical compatibility with the vehicle and offers you

unmatched performance.

ITEM ---- THE MGA ADVANTAGE

Alloy Wheel ---- Perfect Match with vehicle. Safe and reliable. Virgin Aluminium from ISO certified sources. 100% X-Ray tested. Endurance tested. Excellent finish. Better cooling. Better Braking efficiency.

Body Cover ---- High Quality imported Fabric. Water-resistant. 1-Year Warranty. UV Ray protection (UV rays cause paint fading). Very light and easily handled. Matches body profile perfectly. Clamp mechanism. Comes in convenient carry bag.

Carpets ---- Imported materials used. Perfectly fits the contour of vehicle floor. Attractive designs, matching the interior. Odour free.Fire resistant. Fully Washable. Anti Slip mechanism to prevent slipping on floor. Special thread interlocking. Dust absorbing. Reinforced cushioning at drivers area to prevent balding.

Door Visors ---- Perfect fit with vehicle profile. Unique attachment provided for strong fit. Suzuki (Japan) product. Weatherproof. Offers protection from sun-rain. Long lasting and unlike other visors, do not become brittle or crack.

191

Fog Lamps ---- Comes with complete electric wiring, protection relay, switch and lamps. Electrically compatible with the vehicle electrical systems, therefore perfectly safe for the vehicle. No need to cut / splice original vehicle wires, clip-on mechanism. Perfect fit mechanically. Tested for long distance visibility. Beam adjustment screws

Mud Flaps ---- Made from high quality virgin material. Flexible and wear resistant. Matches profile of the bumper perfectly. Best Aesthetics. Sophisticated design. Absorbs impacts (thus protecting bumper)if mud flaps hit any speed breaker / pothole. Heat Cycle and UV Ray tested. Complete protection from mud splash.

Rubber & Designer ---- MatsMade from high quality virgin material. Perfect fit on the vehicle floor. Wear resistant, durable and crack proof. Odour free. Anti-slip design to resist slippage on floor. Heat Cycle and UV Ray tested. Environment friendly. Ozone compliance. PVC "Designer" Mats in attractive multi colours are also available. These are manufactured through a special imported process.

Stereo System ---- Electrically compatible with vehicle electrical system, therefore perfectly safe for the vehicle. No cutting / splicing of original wiring on vehicle needed (clamp-on system). High Quality sound and wide features. Easy installation. Tested over 50,000 Kms. Durable. Approved by Suzuki, Japan. High Quality speakers & antenna.

Security System ---- Many Advanced Features from complete vehicle protection. Electrically compatible with vehicle electrical system, therefore perfectly safe for the vehicle. No cutting / splicing of original wiring on vehicle needed (clamp-on system). 3-Years Warranty.

192

Spoilers ---- Designed by experts to perfectly match the vehicle profile. Gives the best aerodynamic and sporty look. Best fit. Special high strength and low weight materials used. If light provided, the electricals are perfectly compatible with the vehicle electrical systems. Excellent surface finish.

Seat Covers ---- Leather Seat Covers are made from genuine Italian seat covers. In Fabric Seat covers, the best quality fabric used. High levels of craftsmanship. Perfect fit and finish. Matches interiors. Abrasion tested. Same quality as those fitted from factory.

Car CareProducts ---- Body Polish:(protects paint, removes dirt, etc). Glass Cleaner:(cleans windshield, removes stains). Shampoo: (removes grease, stains, etc; protects paint). Tyre Polish: (protects tyre, keeps tyre clean). Upholstery cleaner (cleans & protects car interior upholstery). Dashboard Shiner (keeps dashboard sparkling clean and does not attract dust)

Others ---- Besides these there are a host of other accessories. Warning Buzzer Assembly warns a driver when the door is open and reminds him to fix the seat belt. There are high quality rear parcel tray made of reinforced PP, MGA Heater kits, Shining Gold Emblems, Different Fragrance of Perfumes, Swiss army knives & lot more.

(c)-Maruti Finance

193

We forayed in Maruti Finance way back in 2002 in line of our vision of providing enhanced services and conveniences to our customers.

Leading companies in auto-finance partnered with us in this venture with a mission to offer convenience, transparency and value for money to our customers.

Maruti Finance is one of the auto related service businesses that we entered to provide complete mobility-related solutions to our customers. These businesses have helped us strengthen our relationship with our customer.

Benefits for the Customer

Transparency and Convenience:

Through this initiative our dealerships serve as one-stop shops for customers. The car finance is offered at a transparent rate of interest, and saves customers the cost and inconvenience involved in searching for the "best deal" in the market.

Interest Rate:

Despite increasing interest rates our offer rates have been competitive because we were able to bring together country's leading auto finance companies under a single umbrella.

Wider reach:

In addition, we have been able to offer convenient finance options even in upcountry areas where there is limited availability of organized finance. Besides, it has helped us reach wider range of customer profiles.

Additional services:

Customers availing of loans from Maruti Finance will have the option of securing additional finance for purchase of extended warranty on their cars for

194

upto four years. It will also provide loan "top ups" to new car customers for car insurance and purchase of Maruti Genuine Accessories.

(d) Maruti Insurance

In line with our vision of providing enhanced services and conveniences to our customers we ventured in the Maruti Insurance business, sometime in 2002 along with our other businesses like Maruti Finance and Maruti True Value.

Our studies indicated that customers are looking for insurance products that provide them support, comfort and convenience, more so after their vehicle has met with an accident. Unfortunately, most of these attributes were missing in the market for car insurance. Maruti Insurance was launched to fill this gap.

For this initiative, we have set up insurance distribution subsidiaries, Maruti Insurance Distributors Services (MIDS) and Maruti Insurance Brokers Limited (MIBL) in our dealerships.

Our subsidiaries have tied up with leading general insurance companies of the country as their licensed corporate agents. While MIDS has partnered with Bajaj Allianz General Insurance Company, MIBL will work with National Insurance Company Limited.

Overall, our initiatve in the form of Maruti Insurance promises to be a hassle free and convenient service for Maruti customers.

On-line Motor Insurance renewal

Recently, we introduced the 'online motor-insurance renewal' system. Again, giving flexibility and making their transactions hassle free, transparent and convenient, Maruti has taken a big leap towards customer satisfaction.

Customers can now renew their car insurance instantly, on the internet while paying electronically through credit or debit card.

195

(e)-Maruti True Value

The next time you think of buying a new car and do not know what to do with your old car think of our 'True Value' service.

True Value is the brand name of our business of pre-owned cars. Our foray in pre-owned car business was one of the important initiatives undertaken to extend our relationship with the customer during the entire ownership cycle.

We felt that by offering a platform, which is convenient, and transparent we will able to one expand the family of Maruti customers, two provide reassurance to existing Maruti customers about disposal of their cars and finally reinforce Maruti's image of a reliable and trustworthy company.

'No one knows your Maruti car better than Maruti' - based on this premise, we channelise our expertise to ensure that transactions in pre owned cars are transparent and fair.

The success of this business relies on a transparent and fair evaluation process. We try to ensure that through our processes and systems the seller gets the right price and is paid promptly.

Cars bought under Maruti True Value are taken to our state-of-the-art workshops. Using Maruti Genuine Parts, skilled technicians refurbish them for resale under the Maruti True Value brand.Convenient finance options are also offered to buyers of Maruti True Value cars.

(f)-Maruti Driving School

While the challenge of road safety is gigantic,

196

we at Maruti Suzuki believe that as the market leader we should undertake initiatives that could act as catalysts for other organizations.In line with that, we are managing two IDTRs (Institute of Driving Training and Research) and another 34 Maruti Driving Schools in collaboration with our dealers to inculcate safe driving habits in people.

The Maruti Driving Schools are equipped with the world class, state of the art driving simulators. Over 21,000 people have been trained so far.

The Curriculum

The driving training modules are as per international standards and include both theory and practical. Difficult driving situations such as fog, uphill terrain, rain and night driving is simulated on the simulators to give learners a first hand account of the demanding weather conditions. They are then taken for actual driving on road.

This rich mix of theory and practical gives learners a critical insight into the required driving skills. In addition, the learners are also given technical training like changing flat tyre and handling minor snags and repairs in the vehicle. Special session are organized for learners on traffic rules, regulations and signage's.

Most importantly, the training lays great emphasis on developing right attitude for safe driving and road safety among learners.

For the convenience of women learners, there are lady instructors at MDS.

The Profile of the trainees

It is interesting to note that as many as 53% of those coming to learn driving in these schools are women learners.

Road Safety as a subject is too vast and diverse and requires an integrated approach of Government, Corporates and Civil Society. As we do our bit, we look forward to others in joining us in our Road Safety mission.

(g)-Maruti Auto Card

Maruti’s Auto Card Loyalty cum Rewards Programme

197

To benefit existing and new Maruti Suzuki customers, we rolled out a first of its kind 'Loyalty cum Rewards Programme' in early 2006.

Through this programme, our car owners can easily earn as many as 20,000 Autopoints in four years. One Autopoint is valued at One Rupee. This Rs 20,000 can be used for additional discount by the customer while purchasing the next Maruti Suzuki car.

Alternatively, the accumulated points can be instantly redeemed by customers when they get their car serviced at Maruti Suzuki workshops or while purchasing a Maruti Genuine Accessory worth equivalent amount.

The program is quite unique in terms of the focus on Maruti Suzuki car customers, and the technology deployed to offer flexibility to customers. The loyalty cum rewards programme will be operated through a Maruti Suzuki Autocard which will be offered to Maruti Suzuki car owners who choose to enrol in the programme. A combination of chip based card technology, state-of-the-art Point of Sale Swipe Terminal and IT hardware has been used to make the program user-friendly.

Our partners in this initiative are Citibank, part of Citigroup, the world's largest and most diversified provider of Financial Services and Indian Oil Corporation, the largest commercial enterprise in the country and a leader in the petroleum retailing business in India.

The programme rewards Maruti Suzuki car owners for all their spends at Maruti outlets, IndianOil fuel outlets and for life style spend as the Maruti Suzuki Autocard can be used as an international credit card.

Besides expenditure on car maintenance, even a Sunday night meal out or a shopping trip can contribute to making the customer's next Maruti Suzuki car a whole lot cheaper.

The customer has the option to carry over the points for redemption against exchange (trade-in) of his car for a new Maruti Suzuki car. In addition to autopoints earned by customers, Maruti and its dealers will provide attractive exchange loyalty bonus based on regular servicing and age of car at the time of exchange.

(h)-Maruti Dil Se

198

Our Dil Se program has been specially tailored for Indians residing abroad. It helps them conveniently gift a Maruti car to friends and relatives residing in India- all at the click of a mouse.

We launched Dil Se in July 2006. One of our employee gave this suggestion in an employee communication form.

Dil Se is "one of our unique" initiatives to strengthen our relationship with Indians staying overseas.

Under this program an NRI can gift a car for as low as $99 a month for an Alto, paid over five years. The entire portal is designed to be convenient and transparent. It allows the user to monitor every stage of the transaction online under Dil Se - right from car ordering to delivery of car to their relatives in India. The website provides all necessary information on Maruti models, variants, colours and on-road prices.

In addition, Dil Se comes with many other benefits. These include a special discount, home delivery of car and on priority, pick up and drop facility during car service for the first two years, and discounts on labour charges and car accessories.

There are approx. 5 million Indian households spread across the globe. In addition approx. 3 lac Indian migrate annually.

Dil Se is an initiative from Maruti for specific segments of customers. So far, Maruti Suzuki has launched special car buying schemes for school teachers, employees of state government departments, PSUs, insurance companies and students of top engineering colleges and business schools. All these schemes have received a positive response.

(i)-Extended Warranty

Extended warranty for upto 4 years or 80,000 km is now possible as part of the Extended Warranty scheme from Maruti. One can purchase the Extended Warranty even if the car is currently covered under the primary warranty.

199

Customers can Choose between two options:

OPTION I: Extended Warranty for additional 1 year or up to 20,000 Kms, whichever comes earlier, from the date of expiry of primary warranty.

OPTION II: Extended Warranty for additional 2 years or 40,000 Kms, whichever comes earlier, from the date of expiry of primary warranty.

When to purchase extended warranty

You can buy extended warranty at any time, so long as your car is still under the primary warranty. However, prices are lower if you buy it along with the vehicle. There are 3 prices slabs for purchase of extended warranty:

#Upto 60 days from the date of sale of the new vehicle

#From 61st day to 365 days of sale of new vehicle (about 15% more)

#From 366th day to 730 days of sale of new vehicle (about 30% more)

Please note that the extended warranty can be sold only till the vehicle is still covered under primary warranty of 2 years or 40, 000 Kms whichever is earlier.

How do customers buy it?

Make a payment in the dealer's name at any Maruti Authorised Dealer. The dealer will give you an extended warranty booket with a computer generated contract form pasted in it. This contract form is essential for the warranty to be valid. It is mandatory that the dealer endorse in the warranty booklet: the effective date and km. (activation record for extended warranty), when the standard warranty expires after 2 years or 40,000 Kms whichever is earlier.

200

(j) Reaching out to Customers

Our customers have rated us first in J D Power's Customer Satisfaction Survey for eight consecutive years.When we achieved it first time in 2000, people were skeptical. They could not fathom how could a market leader like us manage to keep happy such a vast and diverse group of customers.

The answer perhaps lies in our approach towards customer satisfaction.

Being first in a Customer Satisfaction rating was not just simply about winning an award. Rather, it became our weapon to fight and win in this competitive market place.

How they evolved their approach?

There was a time( in late 1990's) when we faced some real competition with the entry of global players into India.

We went back to the basics: What was it that the Indian customer desired? Maruti had the right products for India, ones with reliable quality, low cost, top performance and so on. What else could we offer our customers?

It was then that we decided to focus on Customer Satisfaction. Caring for the customer, thinking from his and her point of view, building transparency in our interactions, orienting ourselves to face the customer's needs and concerns rather than the other way round. If we could do all that, our satisfied customers would recommend our products to their friends and relatives and themselves buy their next car from us.

There was nothing new about this strategy; all companies swear by customer satisfaction.

The challenge for us was to go beyond words and make it all work, convert intention into action, translate an intangible mission to tangible benefits,

201

evolve from random and one-off customer benefit gestures to a consistent and systematic effort to satisfy the customer.

Winning became a habit

The JD Power CSI in 2000 was the first endorsement from the customer that we were on track. Before that, we were told that no market leader in any country had ever been rated first in Customer Satisfaction. Market leaders have many more customers to satisfy, and are unable to give them attention like niche players can. In India, where Maruti had more than half the market, the challenge was even greater.

After we won it once, the next task was to repeat it in 2001. No manufacturer, we were told again, had ever won it twice. We broke that record too. Then the hat-trick, four-in-a-row, five-in-a-row and now, a eight. In all these years, the car market has nearly doubled, customer expectations have multiplied, number of models has gone up, technology has evolved, our own dealer network has grown in size and reach. The only common factor throughout has been Maruti's rating in J D Power CSI.

"Maruti Suzuki's overall strength lies in building an organization that is sharply focused on the voice of the customer," said Mohit Arora, India director at J.D. Power Asia Pacific. "Maruti's consistent performance in the study over the past several years has resulted in a steady increase in the percentage of its customers who say they intend to remain loyal to the brand."

202

GOVT POLICIESRELATED

TO THE203

BUSINESS

CHAPTER - 12 GOVT POLICIES RELATED TO THE BUSINESS

REGULATIONS AND POLICIES

GoI has over the years formulated various regulations and policies for the development of the automobile industry in India.

Foreign investment regulations

A new industrial policy was formulated in 1991, in order to implement the economic reforms initiated by GoI. The objective of the policy was to improve the technical capabilities and production capacities of manufacturers in India with minimum foreign exchange outflow. GoI hassince allowed foreign investment in various sectors in a phased manner, gradually allowing higher levels of foreign participation in Indian companies. Since March 2002, GoI has permitted equity ownership by overseas

204

manufacturers of up to 100% in entities manufacturing automobiles and components in India.

Fiscal regulationsIn India, various taxes and levies account for around 50% of the acquisition cost of the passenger car. Levies and taxes include excise duty (24%), uniform state sales tax (12%), and road and registration tax (1-4%).From fiscal 2003, Value Added Tax, or VAT, is to be levied across India in a phased manner. VAT is a broad based tax covering the value added in a product at each stage of production and distribution. The automobile industry involves multi-tiered supply chains, with components andsub-assemblies moving from different states to the final assembly plant. It is expected that the introduction of VAT will rationalize the indirect tax structure and ensure that a simple rate on the value addition will be collected.

Trade regulations

According to the automotive policy formulated by GoI in 1995, global manufacturers were required to sign a memorandum of understanding with the Directorate General of Foreign Trade,in order to obtain licenses to import CKD/SKD kits assembled at plants in India. They were alsorequired to comply with the conditions imposed by GoI with respect to their investment in Indian companies, which included requirements pertaining to levels of indigenisation, minimum capital investment and minimum export obligations.The World Trade Organisation (WTO), of which India is a member, does not allow quantitative restrictions or QRs (such as import licenses and import quotas) on foreign trade. Since April 1, 2001, all QRs on automobiles have been removed and imports of all categories of new and used cars have been allowed. However, the customs duty on imports of new and used cars remains high, with the basic customs duty at the rate of 60% on new CBUs and 25% on CKD and SKD units. In addition, GoI has imposed several conditions on the import of new and used vehiclessuch as restrictions on the age and the residual life of the used car being imported, restriction on the port through which the imports are allowed, requirements of certification from notified agencies regarding various matters,

205

requirements pertaining to the availability of spares and servicing facilities and a requirement that the used cars can only be exported from the country in which they have been manufactured. It is expected that GoI, in order to fulfil its obligations under the WTO, will gradually have to lower tariffs on the import of components, CKDs and SKDs, which in turn is likely to reduce the input costs of car manufacturers in India.

Regulations and Policies Related to Indian Automobile Market:

Over the years GoI has formulated various policies and regulations for the development of the automobile industry in India.

(1)-New Automobile Policy

In March 2002, GoI announced the new automobile policy or NAP. The highlights of the policy and its effects onthe manufacturers are:• Requirement of minimum levels of indigenization was removed.• Requirement of minimum export commitments was removed.• Up to 100% equity ownership in Indian companies by overseas

manufacturers was permitted.• Fiscal incentives were provided for cars less than 3.8 meters in length in

order to establish India as thecentre in Asia for the export of small cars.

• Tax incentives, automatic approvals for investment by overseas entities in Indian entities

• Concessional duty on import of equipment was provided to entities setting up of automotive design firms in India.

(a)-Trade Regulations

The World Trade Organisation (WTO), of which India is a member, does not allow quantitative restrictions or QRs (such as import licenses and import quotas) on foreign trade. Since April 1, 2001, all QRs on automobiles are removed and imports of all categories of new and used cars are allowed. In addition, GoI has imposed several conditions on the import of new and sed

206

vehicles such as restrictions on the age and the residual life of the usedcar being imported, restriction on the port through which the imports are allowed, requirements of certification from notified agencies regarding various matters, requirements pertaining to the availability of spares andservicing facilities and a requirement that the used cars can only be exported from the country in which they have been manufactured.

(b)-Environmental Regulations

The Environment Protection Act, Water (Prevention and Control of Pollution) Act and the Air (Prevention and Control of Pollution) Act require companies to obtain consents for emissions and discharge of effluents into the environment. In addition, GoI notified norms relating to emission by vehicles, age of vehicles and specifications about quality and sales of fuels. These environmental regulations are increasingly driving technology innovation in the passenger car market.

(2)-Environmental Policy

Under the NAP, GoI has announced the environmental policy for automobiles. The policy’s key provisions include:• Approval of Mashelkar committee report• Encouragement for cars using alternative fuel technologies like CNG and electric batteries• Adoption of international standards for levy of road tax such as charging higher tax for older cars, in order to discourage the use of old vehicles. At present, road taxes are levied at the time of purchase and are based on the size of the vehicle.GoI has been developing a regulatory framework to reduce pollution from cars, through a phased introduction ofemission norms.

The framework as introduced by GoI, based on the recommendations of the Mashelkar Committee Report, is as follows:

• Sale of only Bharat Stage II compliant cars in the cities of Mumbai, New Delhi, Kolkatta and Chennai, as applicable from 2000;

207

• Application of Bharat Stage II norms are from April 1, 2003 to the cities of Bangalore, Hyderabad,Ahmedabad, Pune, Surat, Kanpur and Agra and from April 1, 2005 to the whole of India;

• Euro Stage III equivalent emission norms are to be made applicable to the cities of New Delhi, Mumbai,Kolkata, Chennai, Bangalore, Hyderabad, Ahmedabad, Pune, Surat, Kanpur and Agra by April 2005 and Euro IV equivalent norms by April 2010; and

• Bharat Stage II and Euro III equivalent emission norms specifying quality of petrol and diesel that can be sold in various cities that become applicable at the same time as the norms applicable to the sales of cars.

Mashelkar Committee Recommendations

The key recommendations of the Mashelkar Committee Report are as followed:• GoI should only decide the vehicular emission standards and the corresponding fuel specifications without specifying the vehicle technology and the type of fuel to be used;• A roadmap for the implementation of vehicular emission norms and automobile fuel quality;• Vehicles running on alternative fuels, like di-methyl ether, bio-diesel, hydrogen, LNG, CNG, electric and fuel cells, need to be encouraged, giving the choice of fuel and vehicle technology to the customers; and• Putting in place other cost effective measures, such as a comprehensive inspection and certification systems for in-use vehicles with private sector participation, fitting emission reduction devices in-use vehicles, traffic management and construction of bypasses.

In order to meet the new emission norms, substantial investments are required to produce appropriate quality of fuel and vehicles. The Mashelkar Committee Report has estimated that the investment required for upgradingrefineries to produce Bharat Stage II automobile fuels (petrol and diesel) is estimated to be around Rs. 170 billion.An additional amount of around Rs. 180 billion would be required to produce Euro-III equivalent petrol and diesel. Also, the test facilities currently available in the country are inadequate to meet the new regulations.

208

According to SIAM estimates, the cost of setting up additional facilities to test vehicles as per the new regulationswould be around Rs. 10.4 billion (excluding the cost of setting up inspection and certification centers). Hence, the

Mashelkar Committee Report has recommended that preferential treatment be given to the oil and automobile industry in matters relating to:

• Customs duty on imported capital goods, equipment and machinery needed for the upgradation of technology/facilities.

• Excise duty on indigenously manufactured capital goods, equipment and machinery needed for upgradation• 100% depreciation on plant and machinery set up for upgradation• Soft loans for technology modernization/upgradation projects.• Adequate incentives, such as tariff differentials and other measures to enable the domestic industry to compete with imports; and• Financial incentives to the manufacturers and users of electric vehicles in order to make these vehicles competitive.

Safety normsGoI has notified the requirement for use of safety belts in all cars. In addition, new noise control norms for passenger cars were notified by GoI and became effective from January 1, 2003. GoI has also indicated that in the future additional safety norms will be made applicable to passenger cars to align them with internationalstandards.

Sector OutlookBetween fiscal 2002 and fiscal 2007, the entire Indian passenger car market is expected to grow by approximately 9.5%, largely as a result of increasing demand for segment B cars.Segment AThis is the entry-level and the most price sensitive segment. Maruti is the sole manufacturer in this segment since fiscal 2000. Between fiscal 2002 and fiscal 2007, this segment is expected to post a CAGR of 2.7%.

Segment BThis segment is expected to grow to 57.6% of the Indian passenger car market

209

by fiscal 2007 at a CAGR of about 12.3%. Due to the present low per capita income in India, the price and cost of ownership of cars are significant factors that affect demand for cars in this segment.

Segment C, D, and E

There are 11 manufacturers with approximately 20 models in these segments. These segments typically have low sales volumes; therefore, high growth rates of 11%, 19% and 35%, respectively, are expected between fiscal 2002 and fiscal 2007.New model launches, growth in per capita income levels, high aspirations and status associated with larger cars, are the key factors affecting demand for cars in these segments.

The Pre-Owned Car Market

The size of the pre-owned car market in India has been estimated to be more then the size of the new car market. The A and B segments account for between 70 and 80% of the total sales volumes in the pre-owned passenger car market in India. The proportion of pre-owned cars from segment B is increasing and is expected to form the largest portion of the preowned passenger car market. Mid-size and large cars are less popular in the pre-owned passenger car market primarily due to faster depreciation in value, lower fuel economy and higher maintenance costs.The key factors affecting demand for pre-owned passenger car market in India are as follows:• The entry of organized participants into the pre-owned passenger car market resulting in(1) A more transparent process in valuation and assessment of quality,(2) A more convenient means of selling or exchanging pre-owned cars and(3) The availability of adequate warranties.• The introduction of a large number of models in the new car market and a reduction in the holding period resulting in wider availability of recently introduced models in the pre-owned passenger car market• An increase in per capita income levels in urban and rural areas and wider availability of consumer finance for the purchase of pre-owned cars.

Future Scope:

210

1. At present, car penetration in India is about 7 cars per 1000 people, which is even less than some of our neighboring countries. There is also a large population of two wheeler owners, who would naturally upgrade to anentry-level car. Therefore there is large latent demand for passenger cars waiting to be tapped. The compact cars will continue to dominate the passenger car industry in India.

2. The highway and road construction projects, such as the Golden Quadrilateral Project, a highway connecting the four metropolitan areas of Kolkata, New Delhi, Mumbai and Chennai. Availability of better road infrastructure will also affect demand for cars.

3. Passenger car sales account for over 77% of total passenger vehicle market and UV’s account for the balance.In fact, UV’s have a higher share than what they did in the earlier years. It is still lower compared to some of the developed countries. In USA for instance, UV’s account for 50% of the total Passenger vehicles market and in Indonesia they account for 80% of the market. Hence in the future there will be more and more demand for UV’s hence an opportunity for MUL.

4. The enabling factors for Indian passenger car industry are all in place namely, robust economic growth, favourable regulatory framework, availability of affordable finance and improvements in road infrastructure.However, there are some uncertainties like the growing higher oil prices, which could impact the auto industry.

Hence the Indian auto market is at an interesting juncture where both challenges and opportunities are immense.

211

JOB PROFILE

212

CHAPTER - 13 JOB PROFILE

My Job Profile was of Financial Consultant there in RKBK ( Dealer of Maruti Company in Gorakhpur).I was there to advice the customers related to the financing process of the vehchiles related to different banks and provide the customers all the information about the documentation process of different banks.

So,I have taken some fruitful steps with my guide, my colleagues and my ownself. I use to advice the customers there to finance there vehchiles from different banks which are tie-up with Maruti by which the cutomers can finance there vehchiles on low interest rates.

My job profile was there of a financial consultant and I used to provide information to the customers related to auto finance. I use to provide

213

information about the banks which are tie –up with the Maruti and the documentation process of banks to the customers, I also calculate the EMI of the auto finance for the customers to gave them knowledge about the EMI which they have to pay after taking finance from the banks. The EMI depends on the amout of the loan which is taken by the customer for their vehicles.All the information related to the documentation process ,EMI ,documents which are needed for loan according to the bank and customers are given by me.

The work which is related to my profile was as follows :-

(a)-Basic knowledge of all the products manufactured by Maruti Company.

(b)-Events which are organise by company & Bankers for the customers.

(c)-Enquiry generation.

(d)-Co-ordination with banks.

(e)-Co-ordination with the customers.

(f)-Events Organise.

(a)-Basic knowledge of all the products manufactured by Maruti Company :

First of all I have to gain knowledge about all the products of Maruti company from my guide which is necessary to my project and job profile.I have taken some important steps to know all models of maruti , features of all cars,different –different features of all the cars,special quality of different models,rates of models in the showroom and offers and discount related to the models in the showroom.Second I have to covinece the customers to finance their vehchiles from the banks which are tied-up with Maruti and also gave them knowlegde about the models.

I have also taken the complete knowlegde of the cars which are manufactured by Maruti .

The models which are manufactured by Maruti Company are:

#Maruti 800: Launched 1983. Largest selling car in India, until 2004.

214

#Maruti Omni: Launched 1984.

#Maruti Gypsy: Launched 1985.

#Maruti Wagon-R:Launched 1999 Modified 2006

#Maruti Alto:Launched 2000. Currently the largest selling car in India

#Maruti Grand Vitara:Launched 2003

#Maruti Grand Vitara XL-7

#Maruti Versa(2003-)

#Maruti Zen Estilo(2005-)

#Maruti Suzuki Swift (2006- )

#Maruti Swift Diesel (2007- )

#Maruti Suzuki SX4 (May 2007- )

#Maruti Grand Vitara Sports Utility Vehicle Launched in (July 2007- )

#Maruti DZiRE Sedan Version of swift launched in (March 2008- )

(b)-Enquiry generation by the customers:

My job profile is of a financial consultant of customer ,I suggests the customers about the process of Auto- financing and the documentation process of different banks and also to solve their enquiries and problems.

The financial consultant should have total knowledge about all the models and he should also have knowledge about the financial schemes of different banks by which he can provide all the information to the customers and suggests them to finance their vehcles from banks which are tied up with Maruti .

The financial consultant should have total knowledge about the financing schemes of the banks which are given to the customers by banks and he should have knowledge about the interest rates of all the banks .

215

The responsibility of a finance consultant is to have all the knowledge related to the models of the company ,the new product launch of the company , attractive features of the models ,speciality about the models ,so that he can provide all the complete knowledge related to the models among the customers .

The main job of a financial consultant is to fulfill all the enquiry of the cutomers by giving them knowlegde about the models.

(c)-Events Organise at the showrooms:

The role of a financial consultant is to have the khowledge of the events which are organise at the showrooms in past time and about the events which are going to organise by the dealer in future ,so that the financial consultant can easily provide information about the events to the customers ant discount which is going to be given on that event.

My job was there to organise different events in the organisation for the customers in which some special offers and discounts are given and and also some special service coupons are given to the customers of Maruti .

These events are organise for the new and old customers of Maruti Company .

(d)-Co-ordination with banks:

The role of a Financial consultant is to make coordination between the banks and the showroom. Dealers are tie-up with some banks who provide some extra facility and commision to the dealers when the dealer finance a particular amout of vehcles to the customers from their bank in a limited period of time . The time of that particular period and amount is decided by the banks.

The Banks which are tie-up with Maruti showrooms in different cities provide finance to the customers of Maruti at low interest rates and at easy documentation process.

So,the duty of a financial consultant is to maintain relation through the banks to get extra facilities and commision from the banks while financing the vehcles of the customers.

(e)-Co-ordination with customers:

216

I have to make good relation with the customers and to maintain the coordination between the showroom and customers. I have to solve the finance related problems of customers .A financial manager’s duty is to maintain good relation with the customers and gave them knowledge about all the documentation process of different banks which the customers have to face during financing process or they can face in future after financing the vehcles .It is necessary to maintain good relation because old customers can motivate new customers to purchase the cars of Maruti and finance them from the banks which are tie-up with Maruti and it will gave benefit to the Dealer in future in the form of commision which is given by banks to the dealers after completing a particular task assign to them.

So.it is necessary activity to maintain good relation with the customers.

FINDINGSAND

217

LIMITATIONS

CHAPTER - 14 FINDINGS AND LIMITATIONS

# Maruti company has a great goodwill in the automotive market of India.There are many big automobile companies in India like ,TATA Motors, Honda,Hyundai,GM,etc in which Maruti Suzuki India Ltd Company is No.1 Automobile Company in India who have more than half of Market Share in Automobile Market.

# There a lot of scope of Auto finance in India and Maruti Company provide better autofinancing process to their customers on easy Interest Rates and EMI.

218

# Maruti Company recruit a Financial Consultant at the Dealers shop which provide all the information to the customers related to auto-finance.

# The financial consultant provide all necessary information to the customers who need to finance their vehcles.

# Maruti company’s Dealer are tie-up with some Banks who provide easy autofinance to their cutomers.

# The financial consultant explain all the process of financing and the documents which are needed for financing.

# The documentation process of all banks are different and the interest rates,EMI are also different .So,financial consultant explain all the financing process and provide all the information related to the documentation process of auto financing.

# Maruti Copmany has tough competition with Tata Motors,Hyundai,GM.

They are tough competitors of Maruti Company in the automotive market.

# Maruti Company provide easy finance to their cutomer’s to attract them because the customers have no time to do all the time taking documentation process of banks. So,at the dealer’s shop the sales person of Maruti do all the process of documentation only by a phone of customers.

# Maruti Company is looking ahead in Rural Field .They are trying to sale their vehcles to the peoples in the rural areas and they are also providing loan for their vehcles on an easy documentation process.

# Maruti is the first company which is looking ahead to sale their vehcles in rural areas.

219

# I got a good job profile by the dealer because from my profile I come to know about the documents which are needed for car loans.The process of documentation of different banks regarding car loans.

# From my job profile about car loan documentation process of different banks which are also different for different customers.

# From my job profile I came to know about that customers who are interested to buy their vehcles through loaning process of banks instead of purchasing the vehcles directly by cash because of easy EMI’s .

LIMITATIONS:

# The sales person of Maruti Dealer have given a target of financing a particular amount by the banks and the target of that loan should be given within month and they have to fulfill that codition every month to gain extra income for dealership.Dealer provide some extra incentive to the sales person to fufill the target of financing which are given by banks to them ,this personal profit is of 1% to 4% of the car loan financed by them to the customers.

220

SUGGESTION/RECOMMENDATION

221

CHAPTER-15SUGGESTION/RECOMMENDATIONS

(i)-Recommendations to the Company

# More oulets of the company should be there because oulets are not available in all cities ,customers have to go to another cities for the outlets of the cars .

# Prices of car models are different at different Dealers so customers get confused that the dealers are cheating them so the prices of all the car models at every dealer should be same.

# Difference between the EMI of the financed cars which are created by the finance consultants as attractive scames for customers.

222

# The company employees should maintain good relation with the customers and vehcles should be delivered on the same day on which it has been told to the customer for delivery.

# The company should more invest on their Advertisements and Selling expenditure .

# Maruti company also given their advertisements in more popular magazines newspapers to increase their sales .

# Company should provide some special facilities to the customers who are from agriculture field to increase their sales in that area.

(ii)-Recommendations for the Customers

# The important suggesstion to the customers of Maruti company is that they should always use Authorised Service Station for the maintainence of their cars.

# The customers of Maruti cars should contact to their nearest Dealer for any query or for any problems related to their vehchiles.

# An important suggestion for the customers is that if they have enough money to purchase the car then they should not finance their cars from the banks because banks will take a bit more amout from them as interest rates of the banks are high.

# The customers of Maruti should purchase the accessories of Maruti cars only from the authorised dealers of Maruti because if they will use another local accessories in their cars then the warranty of their Maruti is being expired and the dealer will not provide any facility to them.

# The customers can easily get solve their problems and need related to the their cars to their nearst dealer of maruti as the maruti dealers provide one shop stop to their customers ,they can easily get accessories from there and also Insurance ,Finance, Genuine Accessories,Extended warranty schemes from there which is given to the customers of Maruti by the company.

# Maruti company provide Maruti True Valve Shop for the customers who want to sale their used cars and purchase new one and also provide second hand cars to the customers with new warranty on his old vehcles.

223

# Maruti True Value Shop also provide finance facility to the customers who want to purchase used cars through different banks.

# Maruti company is tie-up with some banks who provide car loan to the customers of Maruti on easy Interest Rates .

# Maruti customers should take the facility of after sales service of Maruti company which is given by the company to specially for their customers at a particular time period.

# The customers should ask for Test Drive to the dealer because Maruti company provide test drive for its every model at every dealer’s shop.

# If the dealer is not giving the facility of Test Drive to the customers than they can complain on the Complaint Register which is maintained by company at every dealership to know the problems of their customer related to their vehchiles or any problem related to their staff etc.

(iii)- Recommendations by the Govt to the Automotive Industry

Manufacture and sports of small cars, MUVs should be promoted.

Negative list of items and rules of origin for FTAs/ RTAs to be followed.

Appropriate traffic policy shoul be followed to attract the investment.

Specific measures will be taken for epansiomn of automobile market.

Eports to be encouraged.

Policy initiatives for competitiveness and development of technology would be taken.

National Road Safety Board to act as the coordinating body for promoting safety.

224

Inspection and certification system to be strengthen by encouraging public-privarte partnership.

Centers for Automotive manufacturing excellence should be created.

An –Auto Design centre to be established at NID,Ahemdabad.

Strive for labour reforms.

Rationalisation of motor vehchile regulation to be undertaken.

LEARNING225

WHILEEARNING

CHAPTER - 16 LEARNING WHILE EARNING

These 6 weeks with Maruti company dealer RKBK Automobiles Ltd,Gorakhpur are unforgettable for me .The eperience which I got during these days was tremendous I have made good relation with so many people in that dealer’s organisation were I did my project .

Everybody over there I found were nice and helping to me I also made some good friends of other B-schools who were also management trianee there in that organisation .

Really the experience I have got from my project will be very helpful to enrich and nourish my career.

It was really great opportunity from me to do my internship from RKBK Automobiles Ltd, a dealer of Maruti Company.

226

IN RKBK AUTOMOBILES LTD:

I had learnt how auto finance can be beneficial to an individual customer,for the finance consultants and sales person and mainly for banks.

I had learnt how to behave with the customers and how to conveince them to finance their vehcles from the banks which are tie-up with the company.

I had realize that to sustain in the corporate environment hard work, dedication,confidence,communication skill and and conveincing power are the key to success.

I had got a project which gave me the opportunity to meet with various peoples of different nature .I could understand there the working culture of corporate offices.

My confidence to meet people has tremendously boosted up .Today I have that much confidence that I can meet to any eminent person in any organisation.

My guide also help me very much to learn about the corporate world . How to conveince the peoples,how to explain them all the process of finance, I learnet from them.

I also meet with the customer’s directly there from which I gain the knowledge about how the customers can be conveinced , how their querries are handled.

I also learnt very small small things in the organisation which is very necessary to stay in any organisation.

227

228

OUR ACHIEVEMENT

CHAPTER - 17 OUR ACHIEVEMENTS

I had completed my summer training at ‘RKBK Automobiles Ltd’ a dealer of Maruti Suzuki India Ltd.

I had got there the job profile of financial consultant there in the organisation.I had learnt a lot of things which help me to develop my career in corporate field.

229

1- As management trainee I had learnt how to work in an organisation and also stay in the organisation till 9:30 AM to 5PM daily.

2- I learnt there to communicate with customers.

3- I had learnt how to conveince the customers and how politly solve their queries and problems regarding their vehcles finance.

4- I come to know about all the models of Maruti Company and their features.

5- I come to know about all the documents which are needed for car loans and also all the documentation process of banks .

6- I also come to know that to sustain in corporate environment hard work,dedication,confidence,communication skill and conveincing power are the key to success in an organisation.

7- During my summer training I got a project related to the auto-financing process.

8- I come to know about all the banks and financial institutions which are tie-up with Maruti Company .

230

CASE STUDY

CHAPTER - 18 CASE STUDY

OUTSTANDING LITIGATION AND MATERIAL DEVELOPMENTS

There are no contingent liabilities not provided for, outstanding litigation, disputes, non payment of statutory dues, overdues to banks/ financial institutions, defaults against banks/ financial institutions, defaults in dues

231

towards instrument holders like debenture holders, fixed deposits,and arrears on cumulative preference shares issued by the Company, defaults in creation of full security as per terms of issue/ other liabilities, proceedings initiated for economic/ civil/ any other offences (including past cases where penalties may or may not have been awarded andirrespective of whether they are specified under paragraph (i) of part 1 of Schedule XIII of the Companies Act, 1956) against our Company except the following:

AGAINST OUR COMPANY

Criminal Cases

There are 17 cases filed by customers against the Company and its dealers u/s 420 of the Indian Penal Code, 1860 alleging that the Company and its dealers have failed to perform their obligations either under the contract of sale of vehicle or the obligation under warranty. Of these cases fifteen (15) cases relate to sale wherein the complainant has filed the criminal complaint relating to sales. Two relate to non-performance of warranty obligation after the saleof vehicle. In sixteen (16) of these cases the Managing Director has been made a party to the case or the case has been filed against the company through the Managing Director.

Civil Cases

A. Money Recovery

1. We have a total of 45 money recovery suits pending against us in various courts in India.The total amount claimed from us is Rs. 173,190,686. A few material cases are disclosed below:

# Classic Motors Ltd was a dealer appointed by us and had collected booking amounts for vehicles from various parties. Ashok Leyland Limited has initiated legal proceedingsagainst Classic Motors and our Company alleging a total amount of Rs. 42,700,000/-.Tata Finance Limited has also initiated legal proceedings against

232

Classic Motors and our Company. Tata Finance Limited has alleged that they had booked 40 Maruti vehicles through Classic Motors Limited. Tata Finance Limited has claimed a refund of Rs 3,100,000 from our Company and Classic Motors Ltd. Escorts Finance Ltd has also initiated proceedings against Classic Motors Ltd. We have been named as a party in the suit but Escorts Finance Ltd has not sought any relief against us. All the above suits are pending before the High Court at New Delhi.

# ICICI Bank Ltd has filed a case against our Company and Ganga Automobiles, a dealer of our Company. ICICI Bank had paid Ganga Automobiles for the booking of 60 cars. Thetotal amount being claimed by ICICI Bank is Rs. 17,845,000/-. The case is pending before the City civil Court at Ahmedabad.

# DCL Finance Limited (“DCL”) had filed three (3) suits against Mahalaxmi Motors, RKS Motors and our Company in the Court of the III Additional Chief Judge, City Civil Court ofHyderabad. The City Civil Court of Hyderabad has decreed the suits in favour of DCL. As on the date of the decree, the consolidated amount of all 3 decrees, inclusive of interestand costs, is Rs. 9,240,473/-. Our Company has filed 3 appeals in the High Court of Andhra Pradesh against the decrees of the City Civil Court. The appeals are pendingbefore the High Court of Andhra Pradesh. The High Court of Andhra Pradesh has passed a stay order in all three cases and directed us to deposit half of the decretal amount pluscost and interest. We have deposited half of the decretal amount and the interest plus the costs. There has been no objection raised by DCL vis-à-vis the amount deposited. Paterson Securities Limited has filed a suit against,Pennar Paterson has alleged that demand drafts had been made in favour of our Company for the booking of 20 cars. The claim is for a refund of a sum of Rs. 9,240,473/-.

# Gujarat Lease Financing has initiated legal proceedings against Competent Automobiles (a dealer appointed by our Company) and our Company in the High Court of Delhi. Gujarat Lease Financing has alleged that it intended to lease certain vehicles manufactured by our Company from Competent Automobiles. Gujarat Lease Financing has claimed that booking amounts were advanced to Competent Automobiles but no specifications as to vehicles

233

were stated at that time. It is alleged that 1431 cars were booked but not delivered. Gujarat Lease Financing has claimed a refund of Rs. 16,655,643.28.

# ICICI Bank Ltd has initiated legal proceedings against Rama Automobiles (an erstwhile of our Company) and our Company before the Debt Recovery Tribunal, Ahmedabad. ICICI Bank is seeking relief against Rama Automobiles in terms of an agreement entered into between Rama Automobiles and ICICI Bank. The Company is not a party to this agreement. The total refund claimed is Rs. 75,603,000.A substantial portion of the amounts involved in the above cases is regarding the nondelivery of cars by dealers appointed by MUL after accepting payments from customers.As per the terms of the dealership agreement entered into between MUL and the dealers our dealers are appointed on a principal-to-principal basis. The terms of the sale to the customers do not create a privity of contract between MUL and the customer. The sale by MUL to the dealer and the sale from the dealer to the customer are on a principal to principal basis. MUL’s responsibility is to provide the dealer with the vehicles booked bythe dealer.

# A claim for recovery of Rs. 20 million has been filed by one, Mr. Pradeep Arora against us and Allied Motors (Pvt.) Ltd., an erstwhile dealer

# Hyundai Motor India Limited has initiated proceedings against Varun Motors (our dealer) and our Company. Hyundai Motors has alleged that Varun Motors tampered with a car (manufactured by Hyundai) and used that car for a test drive offer to potential buyers. It is alleged that customers were asked to compare the Hyundai car with a Maruti vehicle. It is alleged that the Hyundai car used was tampered and had been made defective thus resulting in below par performance. The Hyundai Motor India Ltd has claimed compensation of Rs. 10,000,000. The matter is at the trial stage in the City Civil Court in Hyderabad.

B. Other Civil cases

In addition to the above there are 24 other cases relating to various aspects, such as dealership disputes, claim for damages and directions, which are pending before various courts.

234

Labour Cases

1. Cases relating to strikeOur Company faced major labour unrest in September 2000 with regard to the proposed changes to the incentive scheme of the Company. Upon the changes to the incentive scheme in October 2000, the workmen of the Company undertook a tool down strike which later evolved into a strike. Our management advised the workmen to sign a good conduct undertaking reiterating their adherence to the standing orders of the Company and to join duties before the occurrence of such strike. A large number of workmen chose not to sign the good conduct undertaking. The union and the management reached a settlement dated January 8, 2001. The incentive scheme was accepted by the Union on the same terms as initially proposed by the Company.The union challenged the introduction of the requirement to sign the good conduct undertaking and sought a permanent injunction against the signing of the good conduct undertaking in the court of Civil Judge Senior Division, Gurgaon. The Civil Court has refused to grant the injunction in favor of the union. The union filed an appeal against the order of the Civil Court before the District Judge, which was dismissed.The union then filed a writ petition before the High Court, Punjab and Haryana at Chandigarh, seeking an interim stay of the requirement of the signing of the good conduct undertaking.This application for stay has also been dismissed. The writ petition is pending before the High Court.

Summary dismissal for instigation or agitation during strike.

Some of the agitating workers, including some union leaders had been dismissed from service on the grounds of instigating a strike. A total of 24 workmen who had been summarily dismissed have filed cases against the Company in the court of the LCO seeking reinstatement of services with arrears of back wages and continuity of service. The challenges are on the grounds that the mandatory provision in the Standing Order had not been followed and the principles of natural justice have been violated. The cases are in different stages of proceedings before the Labour Court, Gurgaon.

Non-confirmation of trainees

235

Some trainees who were working with us at the time of the strike were subsequently not confirmed on the grounds that their performance in the training had been unsatisfactory and that, in certain cases, they were lacking in integrity. A total of 52 trainees have filed applications with the LCO, Gurgaon and have sought confirmation as employees of ourCompany on the grounds that they are employees and the certified standing orders of the Company are applicable to them and the dismissals are illegal. The trainees have alleged that we are victimizing them for not signing the Undertaking and joining the recognized union in the strike. The trainees have served notice on our Company under Section 2A of the Industrial Disputes Act, 1947. A few of these cases are pending before the LCO and a few have been referred to the Labour Court, Gurgaon.

Unauthorised absence from work

The Company issues charge sheets to workmen for unauthorized absence from their place of work. Pursuant to the respective charge sheets given to individual workers, enquiry committees are set up. In certain cases where the enquiry reports found the charges against the workers accurate and the explanations of the workers unsatisfactory, the enquiry committee recommended dismissal of the workers.17 workers have filed applications before the LCO, Gurgaon alleging that they have beendismissed from service for taking part in the agitation and that the dismissal was against the provisions of the standing orders of the Company and the Industrial Disputes Act, 1947. The Company has filed replies to all these applications and the matters are pending with the LCO,Gurgaon.Derecognition of Maruti Udyog Employees Union (“MUEU”)

The Company has passed an order derecognising the Maruti Udyog Employees Union(“MUEU”) on February 22, 2002. This was done following the de-registration of MUEU by the Registrar of Trade Unions of Haryana.1. The Registrar of Trade Unions of Haryana derecognised MUEU following a complaint by some members that there was mismanagementof funds. We understand that the MUEU has filed a case challenging this decisions in a civil suit in Gurgaon. The Company has in the interim recognized another union, the Maruti Udyog Kamgar Union (“MUKU”). MUKU was registered during the days of the employee unrest in 2001.

236

2. Litigation arising out of the Voluntary Retirement Scheme dated September 24, 2001 (“VRS scheme”), and alleged premature retirement Approximately 200 employees have filed applications before the LCO, Gurgaon alleging that they had been pressurized to resign before the VRS scheme was announced and that the VRS scheme is actually a retrenchment scheme and is in violation of the Section 9A of the Industrial Disputes Act, 1947. The relief being sought by these employees is reinstatement of jobs, arrears of back wages and continuity of service.Some employees have claimed that they had been retired prematurely under the VRS Scheme illegally without consent on their part. The New Delhi High Court rejected this claim of the petitioners and refused to pass an order directing their reinstatement. An appeal against the order of the single Judge has been filed. Our Company has filed its written statement in the said Appeal.Some employees opted for voluntary retirement under the VRS scheme but were denied the benefit of payment of 24 months salary, on the grounds that at the time of opting for VRS a disciplinary proceeding was pending against them. Conciliation proceedings were held but failed. The dispute was not referred to the Labour Court-cum-Industrial Tribunal. The employees have filed a petition praying for directions to the Labour Department to refer thedispute to the Labour Court-cum-Industrial Tribunal and to award costs to the workmen.

2. Cases relating to the erstwhile Maruti Ltd.

Workmen and employees of Maruti Ltd. were retrenched with one month’s salary in lieu of notice, in terms of the settlement between the Official Liquidator and workmen and employees of Maruti Ltd. Some of the employees of Maruti Ltd initiated legal proceedings in the High Court of Punjab and Haryana at Chandigarh seeking reemployment in the Company. The employees claimed that as they were employees of Maruti Ltd and the Company should give them preference for employment. A Division Bench of the High Court upheld their claim and directed the Company to provide the workers employment. The Company filed a special leave petition before the Supreme Court of India which passed an order that status quo be maintained.The matter is pending for hearing before the Supreme Court.Employees and workmen of Maruti Ltd filed further cases on the same grounds as above.

3. Cases concerning the Employees Union

237

The Company has filed a suit against the employees union seeking an injunction to stop the union from creating disturbances by way of strikes and disrupting activities within the factory premises. The Court refused to pass such an injunction. Revision petitions were filed before the High Court to set aside the Order of the lower court. The High Court has issued an order stating that the union is restricted from holding any demonstration within a radius of 500metres of the factory boundary wall. The matter has been referred back to the lower court.A similar injunction has been granted restraining workmen from holding demonstrations within 100 meters of the Corporate Office Building in New Delhi.

5. Cases on House Building Allowance Deduction

13 cases are before the Consumer Disputes Redressal Forum, Gurgaon, under the Consumer Protection Act. All these cases relate to deductions for the House Building Allowance. There are cases relating to the deductions from the employees salaries that took place relating to the house building loans by the company and small claims relating to the same. The Employees of Maruti formed a society, which is registered as Maruti Employees Co-operative Housing Society. The Society arranged an aggregate loan from HDFC for its members for construction of flats over the plots by the said society for its members. Payments are made on monthly installments from the salary of the employees and the disputes concern these deductions and also deductions from the VRS amount. These deductions relate to possible increases in the compensation amount relating to land acquisition by Society.

6. Termination for Misconduct of workmen

R.S. Panwar a worker against whom enquiry proceedings have been initiated has filed a civil suit in the Civil Court, Gurgaon asking for an injunction against the proceedings on the grounds that the enquiry committee had rejected the workman’s nominee as co-worker in the enquiry proceedings. The Civil Court had passed an injunction restraining our Company from having any enquiry without the nomination of a co-worker. The Company then proceeded to dismiss the worker from service without any enquiry vide a letter dated September 27, 2001. As a result of the dismissal, the workman has also

238

filed a suit before the Civil Court Gurgaon initiating contempt proceeding against the Company on the grounds that by proceeding withthe inquiry without allowing him representation, it had violated the interim injunction of the Court. The Company has filed its reply in the contempt proceedings.

7. Contract labour cases

80 contract labourers employed in our canteen have filed a suit for regularization of employment as workmen of the Company in the High Court of Punjab and Haryana at Chandigarh. The court has passed an order that the labourers are not to be dismissed during the pendency of the suit. The contractor, Bharat Trading, has in the interim terminated the employment of 3 contract labourers. The High Court had held the contractor and the Company in contempt and granted the contractor one month to reinstate the dismissed contract labourers. The contractor has reinstated the contract laborers. The contempt petition has been disposed off. The main suit for regularisation has been referred to the Labour Court for adjudication.

8. Other Cases

In addition to the cases details above there are 43 cases relating to labour disputes between the Company and workers in which the company has either received notices and no proceedings have been initiated or that are pending at various stages at different courts.

Monopolies and Restrictive Trade Practices

We have thirteen (13) cases pending before the MRTPC, the material claims against the Company are as follows:

1. There are three applications under Section 12B of the MRTP before the MRTPC filed by various parties against the Company and M/s Ganga Automobiles. The cases relate to the non-delivery of automobiles by Ganga Automobiles. The total amount claimed is Rs.7,838,108/- plus interest on the claimed amount.

239

2. There are 5 enquiry proceedings/cases pending in relation to alleged restrictive trade practices followed by our Company. The enquiries relate to various issues, such as:

# Payment of incentives to our dealers# Dealership agreements which we enter into with each of our dealers contain restrictive covenants# Conditions imposed at the time of booking of our cars with the dealer# Practices followed for over the counter delivery of cars# Interest paid to customers on booking amountsThese enquiries seek cease and desist orders against the Company.

3. In addition to the cases detailed above there are 4 cases filed by our customers against the Company for compensation that are pending at various stages before the MRTP Commission.

3. There is one unfair trade practice enquiry filed against the Company. The relief sought is to restrain the Company from delivering certain models under a particular scheme.

Consumer Disputes

2. Various consumer cases against our dealers and us (where we have been made a party) are pending before National Consumer Disputes Redressal Commission, State Commission or the District Forums. Such pending consumer claims are classified on the basis of the forum in which they are pending and listed below.

Forum Number ofCases :Total Amounts Claimed (in Rupees)

1. National Consumer Dispute Redressal Commission 23 61,801,591

2. State Consumer Dispute Redressal Commissions 83 37,391,308

3.District Consumer Disputes Redressal Forum 677 125,727,453

240

There are two claims for an aggregate amount of Rs. 64,900,907/- relating to our erstwhile dealer M/s Ganga Automobiles. A customer, Smt Shukla Ghosh has filed a claim for Rs. 2,000,000/- alleging at there is a manufacturing defect in the steering system of one of our car models. The matter is pending before the State Consumer Disputes Redressal Commission, Kolkata.

3.Cases relating to Catalytic converter installation

There are 28 claims filed before the District Consumer Disputes Redressal Forum, Chandigarh pursuant to a newspaper article alleging that the car prices by the Company were hiked on account of installation of catalytic converters but the Company did not fit the part. All customers in the above complaints had sought the refund of Rs. 7,000 on the ground that Maruti had enhanced the price by Rs. 7,000 on account of fitting of catalytic converter and their cars are without catalytic converters. In some of the claims, the District Consumer Disputes Redressal Forum, Chandigarh had held that Maruti have charged the price of a component, which they have not supplied and the enhanced price on account of catalytic converter is clearly refundable to the complainant.1.The State Consumer Disputes Redressal Commission, Chandigarh dismissed the appeal, inter alia, with the observation that "if the machine delivered does not contain any particular part /gadget, the customer will get the part/gadget or return of the value thereof." The National Consumer Disputes Redressal Commission confirmed the earlier orders and dismissed the Revision Petitions.

2.Our company has filed a special leave petition in the Supreme Court of India, which has stayed the operations of the order(s) passed in the revision petitions. All the above matters were adjourned sine die.

3.Cases relating to refund of excise duty for taxis.There are 37 cases pending before various Consumer Disputes Redressal Forum relating to the refund of excise duty to customers who have bought vehicles for use as taxis.

There are some cases in which the respective District Consumer Forums have passed adverse orders against the Company in this regard. The Company has preferred appeals against such cases.

241

Motor Accident Claims

The Company has eight motor accident claims pending against it before the MACT, with the amount claimed (not including interest) totaling to Rs. 72,19,184/ -

Arbitration

We have initiated arbitration proceedings against a few of our dealers as follows:

Name of Dealer Our Claim Counter claim Mahalaxmi Motors Rs. 153,025,610/- with further interest at 18% with effect from 1.11.2002 Rs. 737,037,776/- with interest at 30% p.a.Classic Motors Limited Rs. 367,471,000/-In the case of Mahalaxmi Motors, the Honourable sole arbitrator has passed an order dated 25th March 2003 stating that he is prima facie satisfied that our Company has made out a prima facie case for an interim order and directed Mahalaxmi Motors to furnish a bank guarantee for a sum amounting to Rs 76.3 million.Land Acquisition Cases

The GoI had acquired land under the Land Acquisition Act, 1894 for the purpose of factory land for Maruti Limited. Some of the land oustees have filed suit for mandatory injunction in the Civil Court, Gurgaon seeking employment on the basis of an agreement allegedly entered intoamongst Maruti, Gram Panchayat and Local Administration, Gurgaon. However, no such agreement was placed on record of the Court in support of their claim by any of the claimants. Some of the claimants have placed a copy of minutes allegedly recorded on the conclusion of alleged meeting as stated above. Six (6) such suits are pending as of date against the Company out of which the City Court, Gurgaon has decreed two such suits while taking the cognizance of the minutes of meeting and directed the Company to provide employment to the claimants. Out of the two matters hereinabove, the Company’s appeal in one matter is pending in the District Court whereas in the other matter, the claimant did not join within one month as directed by the High Court, Chandigarh and the matter stands closed.In another three suits, the City Civil Court, Gurgaon dismissed the suits and no relief was

242

granted to the claimants. The said claimants have filed First Appeal before the District Judge, Gurgaon, which is pending.

One such land acquisition matter is pending in the High Court, Chandigarh after the dismissal of First Appeal by the District Judge in the favour of the Company.

Sales Tax Cases

1.Imposition of sales tax by National Capital Territory of New Delhi.

The Company besides selling passenger vehicles to dealers also sold vehicles to certain customers outside the state of Haryana directly from its factory at Gurgaon. The inter-state sales tax payable was collected and deposited with the sales tax authorities at Gurgaon. As per sale system for direct billing from factory, customers placed the orders and collected passenger vehicles through dealers situated outside Haryana. The Delhi Sales Tax Department considered such direct billing of vehicles delivered to customers through Maruti Sales & Service, Delhi, or MSSD, a division of Maruti Udyog, as local sales in Delhi (and not an inter-state sales in Gurgaon as treated by the Company). Thus, a demand of Rs. 46,676,834.00 was raised in February 1993 for deposit of local sales tax (for the assessment years 1988-89 to 1991-92). The assessment orders were received in February 1993 and the appeal was filed in the same month. The Company has obtained a stay from the Delhi High Court (in March 1994) against the additional demand on conditional deposit of Rs. 400,000 for each assessment year. The case is pending for hearing on merits before the Additional Commissioner, Sales Tax Department, Delhi.

2. Sales tax liability for the Assessment Year 1988-1989.

The Assessing Authority, or AA, Gurgaon, has imposed an additional duty of Rs. 2,426,524.00 on the Company for the assessment year 1988-1989. The AA has treated the Omni vehicle as a ‘van’ and taxed the same at a rate higher than applicable to ‘motor cars’. The Sales Tax Tribunal has remanded the matter to the AA.

3.Sales tax liability for the Assessment year 1985-1986.

243

In the course of business the company had transferred vehicles to its branches out side the states and the Company had deposited the purchase tax on these transactions. The Excise and Taxation Officer, Gurgaon vide letter dated August 10, 1989 has imposed interest and penalty amounting to Rs. 1,211,327.00 on the Company for not depositing purchase tax within due dates. The Sales Tax Tribunal has remanded the matter to the AA.

4.Contingent sales tax liability with respect to stockyard:

Contingent sales tax liability with respect to Bhopal Stockyard. The AA has imposed sales tax and penalty for assessment year 1987-88 amounting to Rs. 1,742,764.00. The Company has paid Rs. 174,500.00. Contingent sales tax liability with respect to Gwalior Stockyard. The AA has imposed sales tax and penalty assessment year 1987-88 amounting to Rs. 127,503.00. The Company has paid Rs. 12,750. Contingent sales tax liability with respect to Kotwan Stockyard. The AA has imposed sales tax and penalty amounting to Rs. 340,000.00.

4. Excess adjustment of first point tax rebate of sales tax on sale of after-sales spare parts during the year 2001-02 and period April 1, 2002 to December 31, 2002.The AA, Gurgaon has issued two show causes notice dated February 27, 2003 to the Company asking for payment of the short payment on account of excess adjustment of first point tax rebate of sales tax on sale of after-sales spare parts during the year 2001-02 and period April 1,2002 to December 31, 2002.

The Company had claimed adjustment of first point tax amounting to Rs. 76,043,114.38 for the year 2001-02 and Rs. 59,260,407.66 for the period April 1, 2002 to December 31, 2002 under Section 15-A of the Haryana General Sales Tax Act, 1973 on account of tax paid on purchase of goods within the State.The AA has stated that the adjustment of tax is admissible only in respect of goods purchased for use in manufacturing. The AA claims that the Company in the process of manufacturing is using only original equipment and that the spare parts are purchased by the spare parts division for trading in spare parts and thus such purchases within the state are inadmissible for claiming adjustment under Section 15 A of the Haryana General Sales Tax Act, 1973.

244

The Company is claming this rebate on the basis of a notification issued by the Government of Haryana bearing No. S.O. 32/C.A. 74/1956/S.8/2001 dated 19th March 2001. The contingentliability amount is Rs. 135,303,521.

AGAINST OUR JOINT VENTURES AND ASSOCIATES

(i)-Asahi India Glass Ltd. (“AIG”)Contingent liabilities not provided for as on March 20, 2003]:

# Guarantee / Letter of Credit / Bill of exchange discounted – Rs. 123.06 million.

# Disputed demand relating to pending Excise cases - Rs. 123.62 million.

# Others – Rs. 10.27 million.

# Estimated value of contracts remaining to be executed on capital account – Rs. 11.41million.

Outstanding litigation as on March 20, 2003

Civil cases

# A winding up petition has been filed by AIG against Pal Peugeot Ltd. in the Bombay High Court involving the outstanding amount of Rs. 0.44 million due and payable by Pal Peugeot Ltd. to AIG. This winding up petition has been accepted and clubbed for hearing with other similar petitions filed against Pal Peugeot Ltd.

# A suit has been filed by Thawar Steel Traders in the Addl Civil Judge, Rewari, Haryana for recovery of about Rs. 0.13 million , which AIG is disputing.

# An application has been filed in the Debt Recovery Tribunal, New Delhi, by Standard Chartered Bank against Paras Ram and Pista Agarwal in respect of the shares of AIS pledged with the said Bank. AIG has been made a party

245

to this application for handing over of dividend warrant and bonus shares pertaining to pledged shares.

Labour cases

# 1 case filed by Mr. Inderjit Yadav in Punjab & Haryana High Court, Chandigarh, challenging his termination and praying for reinstatement with back wages.

# 2 cases filed by Mr. Karambir and Mr. Balwan Singh in Labour Tribunal, Gurgaon challenging the termination of their respective services.

Income Tax

# 1 appeal pending before the Income Tax Appellate Tribunal involving Rs. 2.9 million.

Central Excise and Customs

# 1 Show Cause Notice pending before the Deputy Commissioner of Central Excise, Division– II, GGN, involving an amount of Rs. 47.3 million

# 2 Show Cause Notices pending before the Additional Commissioner of Central Excise, Gurgaon, involving the aggregate amount of Rs. 0.691million.

# 4 Show Cause Notices pending before the Commissioner of Central Excise, Delhi III involving an aggregate amount of Rs. 49.83 million.

# 1 Show Cause Notice pending before the Superintendent of Customs (Drawback), Air Cargo Unit, New Customs House, New Delhi, involving an amount of Rs. 1.2 million.

# 1 Writ Petition pending in the Delhi High Court involving an amount of about Rs. 347.00

246

million.

(ii)-Bharat Seats Ltd (“BSL”)Contingent liabilities not provided for as on March 13, 2003:

The aggregate of the demand based on the difference between the excise records maintained by BSL and the balance sheet stock figures for the Financial Years ended March 31, 1997, March 31, 1998 and March 31, 1999 is about Rs. 10.16 million.

Outstanding litigation as on March 13, 2003:

Central Excise and Customs

# Demand of about Rs. 3195.00 million (including penalty of about Rs. 65 million), which had once been decided in the favour of the Company by CEGAT, the Department hadsought the intervention of the Hon’ble Delhi High Court which had issued adjusted the directions to CEGAT to clarify certain points of law arising out of that order. Matter is still pending for final decision.

# The Company has received a refund of customs duty of about Rs. 6.25 million from the Assistant Commissioner (Refund), Customs House, Khandla, which had been adjusted against “Loans and Advances” shown in previous years. However, subsequently a notice was received to refund the same on the ground that it was erroneously being granted.The Company has filed a suitable reply to the Customs Authorities and the matter for final decision.

# 1 Show Cause Notice pending before the Commissioner of Central Excise, Delhi III, Gurgaon involving an aggregate amount of about Rs. 10.1 million.

(iii)-Denso India Ltd (“DIL”)

Outstanding litigation as on March 20, 2003:

Income Tax

247

# 1 appeal pending before the Income Tax Appellate Tribunal involving Rs. 0.1015 million.

# I appeal pending before Commissioner of Income Tax (Appeals) involving Rs. 0.493 million. (It is not clear from the new certificate whether this case is pending or disposedor not. Please obtain a confirmation from the Company)

Sales Tax

# 1 demand remanded by the Appellate Deputy Commissioner to the Assistant Commissioner for re-assessment on taxability on sale of assets, involving Rs. 0.411 million.

Central Excise and Customs

# 1 appeal pending before the Commissioner of Central Excise (Appeals) involving an amount of Rs. 1.608 million.

Labour cases

1 case pending for reinstatement of employee.

(iv)-Jay Bharat Maruti Ltd. (“JBML”)

Contingent liabilities not provided for as on March 20, 2003Guarantees issued by the banks for letter of credit about Rs. 79.1 million.

Outstanding litigation as on March 20, 2003:

Civil cases

# 1 Special Leave Petition pending before the Hon’ble Supreme Court challenging the External Development Charges for Plant II for Change of Land Use involving the amount of Rs. 10.63 million. 10 % of the charges deposited as per Supreme Court direction, but not accepted by the Department.

248

Sales Tax

# 1 Writ Petition pending before the High Court of Punjab & Haryana against a demand made by the Sales Tax Department, Haryana involving the amount of Rs. 18.08 million.

Central Excise and Customs

# 7 cases pending before the Commissioner of Central Excise, Delhi III, Gurgaon involving an aggregate amount of Rs. 140.04 million with interest and penalty.

# . 2Appeals pending before Commissioner, Central Excise (Appeals), Gurgaon involving an aggregate amount of Rs. 2.8 million with interest and penalty. These appeals are likely tohave adverse impact on the financial performance of Maruti.

(v)-Machino Plastics Ltd. (“MPL”)

Contingent liabilities not provided for as on February 28, 2003:

# Disputed demand under Employees State Insurance Act, 1948 involving an amount of Rs.0.11 million (previous year about Rs.0.11 million) for which appeal is pending beforethe relevant authorities.

# Sales tax sureties given for Machino Basell India Limited, a supplier and a related party for about Rs. 22.92 million (previous year about Rs. 17.91 million).

# Future Commitment for lease agreements entered before April 1, 2001 for Rs. 240.2 million.

Outstanding litigation:

249

# 1 appeal pending before the relevant authority under Employees State Insurance Act, 1948 involving an amount of Rs.0.11 million.

(vi)-Sona Koyo Steering Systems Ltd. (“SKSS”)

Contingent liabilities not provided for as on March 20, 2003:

Claims against the company not acknowledged as debtOn account of

a) Customs duty - about Rs. 0.90 million (Company to confirm)b) Others - about Rs.4.87 millionIn respect of matters in appeala) Income Tax - about Rs.42.86 millionCustomer bills discounted - about Rs.28.88 millionCorporate Guarantee in respect of

a) Employee Loan - about Rs.2.35 million

(vii)-Caparo Maruti Ltd (“CML”)

Contingent liabilities not provided for as on March 20, 2003

ESIC Demand - about Rs. 0.0083 million

(viii)-Citicorp Maruti Finance Ltd (“CMFL”)

Contingent liabilities not provided for as on March 20, 2003

As on March 24, 2003, there are no contingent liabilities which are not provided for.Outstanding litigation:

Criminal cases

# There are totally 442 criminal cases filed by CMFL under section 138 of the Negotiable Instruments Act, 1981 in respect of bouncing of cheques against various parties, which are pending at different stages.

250

# There is one Superdari case filed by CMFL against Hindustan Industrial Security.

# There are 29 criminal cases filed by CMFL under section 406 of the Indian Penal Code against various parties, which are pending at different stages.

Civil cases

# There are 14 money recovery suits filed by CMFL against various parties in the Trial Court at Tis Hazari, New Delhi involving an amount aggregating approximately to Rs.1.9 million.

# There are 27 cases (7 cases relating to repossession, 6 relating to injunction, 1 relating to employee and 6 counter claims) filed against CMFL in various courts for different reliefs, which are pending.

(ix)-Climate Systems India Ltd. (“CSIL”)

Contingent liabilities not for provided:Bank guarantees to the Sales Tax Department about Rs. 10,000/-

Outstanding litigation:

Income Tax# 4 Appeals pending before the Commissioner of Income Tax (Appeals) involving the aggregate amount of about Rs. 5.60 million

# 1 appeal pending before the Income Tax Appellate Tribunal involving about Rs. 2.02 million

251

# 1 Appeal pending before the Sales Tax Authority involving the amount of about Rs. 0.30 million.

In the event of the above cases not being decided in favour of CSIL, the combined income tax liability of CSIL shall be Rs. 2.8 million and sales tax liability shall be Rs. 0.3 million. These cases then are likely to have adverse effect on the financial performance of CSIL

(x)-J J Impex (Delhi) Pvt. Ltd. (JJIDPL)

Outstanding litigation:

Civil case# 1 case pending in the District Consumer Disputes Redressal Forum, New Delhi filed by Mr.Vineet Kumar involving an amount of Rs. 0.2 million.

(xi)-Krishna Maruti Ltd. (“KML”)

Contingent liabilities not provided for as on March 20, 2003:

Excise Duty about Rs.39.10 millionCustoms Duty - about Rs. 7.43 millionUnexpired Letter of credit Rs. 26.9 million

Outstanding litigation:

Central Excise and Customs# 4 Show Cause Notices pending before the Commissioner of Central Excise, Delhi III involving an aggregate amount of Rs. 37.50 million with interest and penalty.

252

# 1 Show Cause Notice pending before the Deputy Commissioner of Central Excise, Division– II, Gurgaon involving the amount of Rs. 0. 10 million with interest and penalty.

# 2 Appeals pending before Commissioner, Central Excise (Appeals) involving an aggregate amount of Rs. 1.60 million.

# 3 Show Cause Notices pending before the Deputy Commissioner, Customs House, Kandla involving an aggregate amount of Rs. 7.43 million.

(xii)-Mark Auto Industries Ltd (“MAIL”)

Contingent liabilities not provided for as on March 20, 2003:Bank Guarantee outstanding - about Rs. Rs. 17.02 millionLetter of credit issued – about Rs. Rs. 22.9 million Unpaid liabilities on account of leased assets - about Rs. Rs. 97.6 million Disputed demands related to Income Tax – about Rs. Rs. 4.44 million Disputed demands related to Excise cases - about Rs. Rs. 4.62 million

Outstanding litigation as on March 20, 2003:

Income Tax# 5 appeals pending before the Income Tax Appellate Tribunal involving the aggregate amount of Rs. 4.74 million.

# 1 appeal pending before the Wealth Tax Appellate Tribunal involving the amount of Rs. 0.004 million.

Central Excise and Customs# 1 Show Cause Notice pending before the Deputy Commissioner of Central Excise, Gurgaon involving an amount of Rs. 0.22 million.

# 1 Show Cause Notice pending before the Commissioner of Central Excise, New Delhi involving an amount of Rs. 6.30 million. If this notice is decided against MAIL, the same is likely to have an adverse effect on the financial performance of Maruti.

253

# 2 Appeals pending before the Commissioner of Central Excise (Appeals), Collectorate No.III, New Delhi, involving the aggregate amount of Rs. 39.70 million.

# 1 Appeal pending before the CEGAT, which if decided in favour of MAIL, would involve refund of the duty paid by MAIL to the Customs department.

# 1 case pending with Deputy Commissioner Central Excise involving an amount of Rs. 0.2 million.

Civil Cases# A Special Leave Petition has been filed in the Hon’ble Supreme Court against the Extra Development Charges levied by the Director, Town & Country Planning, Haryana amounting to Rs. 7.2 million on the Company’s property situated at Village Begampur Khatola, Gurgaon, Haryana.

Criminal Cases# A complaint was filed against Mr. K. M. Talwar, former Managing Director of the Company under the provisions of section 630 (b) of the Companies Act, 1956 in the Court of Chief Judicial Magistrate, Gurgaon, for recovery of the company’s assets worth Rs. 4.1 million which are retained by him even after resigning from the company.

Legal Notices (Possible litigation in future):

# A legal notice dated 04.09.2002 was sent to Unitech limited for recovery of Rs. 9.5 million out of a total amount of Rs. 10.9 million paid to Unitech Limited for 2430 square feet area of office space, in Signature Tower, Gurgaon, after deducting earnest money of Rs. 1.45 million.The only adverse effect on Maruti would be in respect of the case before the Commissioner,Central Excise, New Delhi in respect of the amount of Rs. 6.3 million relating to 40% Cenvat credit on FOC items invoices.Maruti Countrywide Auto Financial Services Limited (“MCAFSL”)Contingent liabilities not provided for as on April 1, 2003:Bank Guarantees – Rs. 0.07 million Claims not acknowledged as debts – Rs.0.21 million Disputed tax liabilities – Rs.0.70 million.

254

Outstanding litigation:Criminal cases:

# 1 case (Vikas Motor Vs MCAFSL) pending before the MM, room No. 182, Tis Hazari Court, Delhi, under section 138 of the Negotiable Instruments Act for an amount of Rs. 0.5 million.

# 1 Complaint under sections 406 and 409 of IPC, pending before the Consumer Redressal Forum, Bandra amounting to Rs. 0.48 million.

# 1 case under section 506 (2) of IPC pending in the Metropolitan Court, Meghani Nagar.

# 1 case under sections 294(B), 506(1) and 34 IPC pending before the First Class Magistrate,Court-II, Kochi.

Consumer Cases:# 6 cases pending before various consumer forums, involving an aggregate amount of Rs. 0.54 million.

Civil cases:# 3 civil cases pending in various courts, involving an aggregate amount of Rs. 10 million.

(xiii)-Mark Exhaust Systems Ltd (“MESL”)

Contingent liabilities not provided for as on March 20, 2003:

# Bank Guarantees issued by Banks - about Rs. 26.34 million# Unexpired Letter of credit - about Rs. 22.33 million# Customs Duty on damaged goods in Kandla cyclone - about Rs. 3.42 million# Value of bond executed in favour of Commissioner of Customs in respect of license issued under EPCG License - about Rs. 4.45 million and also furnished a bank guarantee of about Rs.2.23 million to meet export obligations of Rs.45.90 million.

# Value of bond executed in favour of Commissioner of Customs in respect of Advance License for intermediate Exports - about Rs. 7.86 million and also furnished a bank guarantee of about Rs.5.53 million to meet export

255

obligations of Rs.22.41 million, the outstanding as on March 20, 2003 being Rs. 20.20 million.

Outstanding litigation:

Civil CasesA Special Civil Application has been filed by MESL in the Hon’ble High Court of Gujarat at Ahmedabad for expediting recovery of the claim amount for loss of some material belonging toMESL in the Kandla cyclone, which claim the Insurance Company has accepted but not released because the Customs Authority has not accepted the remission application.

AGAINST VENTURES PROMOTED BY SUZUKI IN INDIA

Subros Ltd

Contingent liabilities not provided for as on April 1, 2003Bank Guarantees issued by Banks - about Rs. 30.33 millionOutstanding Letter of credit - about Rs. 380.6 millionDisputed demand under Income Tax Act - about Rs. 0.30 million Disputed demand under Central Excise Act - about Rs. 252.87 million Other claim including labour matters - about Rs.2.88 million.

Outstanding litigation:

Labour Cases:# 9 labour cases filed in the Labour Court, Ghaziabad involving the approximate aggregate amount of Rs. 0.93 million.AGAINST SUZUKI

There are no contingent liabilities not provided for, outstanding litigation, disputes, non payment of statutory dues, overdues to banks/ financial institutions, defaults against banks/ financial institutions, defaults in dues towards instrument holders like debenture holders, fixed deposits,and arrears on cumulative preference shares issued by the company, defaults in creation

256

of full security as per terms of issue/ other liabilities, proceedings initiated for economic/ civil/ any other offences against Suzuki in India.

AGAINST OUR DIRECTORS

There is one case filed by a customer against Mr. Kinji Saito, Director (Marketing & Sales) and the Company u/s 420 of the Indian Penal Code, 1860 alleging that the Company and its dealers have failed to perform their obligations under the contract of sale of vehicle. The case has been filed in Sabalgarh, Morena district.

257

CONCLUSION

CHAPTER - 19 CONCLUSION

258

MARUTI SUZUKI INDIA LTD COMPANY is the biggest Automotive Industry of India.It has a great goodwill in the Automotive Market.There are many big Automotive companies are in the Indian Automobile Market and Maruti Suzuki is No.1 in the Indian Automotive Market.

Maruti Suzuki Automobile Company provide its customers the facility to finance their vehcles.Company tie-up with banks and financial institutions which provide car loan to the customers of Maruti at low interest rate and easy documentation process.

Maruti Company see a lots of scope in financing the automobile field.By providing this facility to their customers Maruti Company is attracting many customers.From providing this financial facility at every dealer point. By using this facility the customers who are not able to purchase Maruti Vehcles directly through cash payment,they can purchase cars through the car loans schemes of banks.

Maruti Suzuki Company has tough competition with other Automobile companies as like as TATA Motors,Hyundai Motors,General Motors,Toyota Motors, Ford Motors, etc.

I found during my study at Maruti Dealer’s shop that in fiancing sector a person should have great communication skill because we need a great communication power to communicate with customers.

Maruti Company is interested in the field of Auto financing because there are a lots of chance to increase their profit by selling more vehcles and also to increase their market share in the Automobile Market.

People took interest in buying vechcles through financing .

Maruti company is providing easy car loan facility to their customers through making more tie-up with banks in different area.

It was a great experience to communicate with different people.I learnt to coveince customer’s and make them clear about their all queries related to auto finance .

259

BIBILIOGRAPHY

CHAPTER - 20 BIBILIOGRAPHY

260

Journals/Magazine :

Advisor of Finance

Search Engine :

Google search engine

Yahoo search engine

Websites :www.maruti.com

www.marutisuzukiindia.com

www.sebigovt.com

www.business-today.com

www.datamonitor.com

www.marutiudyog.com

www.carwale.com

www.thetimes.com

www.indiaautomobile.com

www.walkb4urun.blogspot.com

www.expressindia.com

www.voicendata.com

www.marutisuzuki.com

www.business-india.com

www.indiaearnings.com

www.answers.com

www.marutiautocard.com

www.marutidilse.com

www.marutidrivingschool.com

261

www.marutiinsurance.com

www.iexpressindia.com

www.indiainfoline.com

www.sonakoyo.com

www.vahini.co.in

www.autoexpo.com

www.thehindu.com

www.thehindubusiness.com

www.karamiri.com

www.tatamotors.com

www.tatacompany.com

www.hondamotors.com

www.hondacompany.com

www.toyota.com

www.toyotamotors.com

www.toyotacompany.com

www.hyundai-motor.com

www.hyundai.com

www.hyundaicompany.com

www.world.honda.com

262

WORDOF

THANKS

CHAPTER - 21 WORDS OF THANKS

263

I take the opportunity to pay hearty regards to Dr. D. K. GARG (Chairman),

Mr. M. K. VERMA (Dean) and A.K.BHATTACHARYA(Director) for

lending me their kind support for completion of my project.

I thank all those who directly or indirectly supported me morally, financially

and through providing knowledge by which I could complete my summer

training project.

Last but not the least I am thankful to the management of RKBK

Automobiles Ltd (Dealer of Maruti Suzuki India Ltd) & especially to my

guide Mr. Dinesh Purohit whose co-operation and guidance was a milestone

in completion of my project.

264

265