Addressing shareholders at its annual general meeting, Maruti Suzuki India (MSI) Chairman R C Bhargava said in order that the company is "not exposed to the variation in the exchange rate which has been happening in the past", royalty to Suzuki for all future models will be in Indian rupees instead of yen on the current models.
He did not specify what the future models would be but according to company officials it could be those upcoming products on which Maruti is yet to sign a technical agreement with the parent.
"More and more R&D work will be done in India and royalty calculation will be based on work done here and our expenditures on R&D will be rewarded in the form of reduced royalty," he added.
In the first quarter ended June 30, 2014, MSI had paid royalty of Rs 689 crore, which was 6.2 per cent of net sales.
MSI expects the royalty paid to parent Suzuki Motor Corp to come down starting with its upcoming compact SUV as its engineers enhance their role in the joint development of future products.
"Maruti has not been present in the SUV segment and Suzuki Japan has been aware of it. Early next year we will launch our SUV and a compact SUV will follow a year later. With these we will have sizeable presence in the SUV segment and fill unutilised capacity at Gurgaon and Manesar plants," Bhargava said.
On the Gujarat plant, Bhargava urged the shareholders to exercise their franchise favourably in the voting that is to take place sometime next month to let Suzuki own and invest at the facility.