Suzuki Hikes Price Of Maruti Parts

Suzuki Motor Co (SMC) of Japan has increased the price of components supplied to Maruti Udyog Ltd (MUL) by 2.5 per cent for the year 1997-98.

This will push up the annual import bill of MUL to Rs 700 crore, an increase of Rs 20 crore over last years payout for Suzuki auto parts.

MUL is a 50:50 joint venture with the Government of India which manufactures several models from the Japanese automakers stable.

The agreement on the new price was signed last month. It will be up for renewal at the end of the current fiscal year.

According to sources, the Japanese carmaker had initially asked for a higher increase in its supply price.

 

According to an agreement signed last year and effective from April 1994, MUL pays a predetermined lumpsum amount per car as royalty to Suzuki, instead of a percentage of sales paid in the previous years.

Gearbox and bearings are among the major components sourced from Suzuki by MUL. These and a few other precision components account for over five per cent foreign content in the Maruti range of cars.

With Suzukis plans to set up a separate joint venture with MUL for an aluminium foundry for making some components, including gearboxes, Maruti expects to increase its indigenisation by about another five per cent.

Marutis 800 cc car and the Omni currently has 95 per cent local content, while the Zen has a 90 per cent indigenisation level. The company is trying to increase the local content in Gypsy from 80 per cent to 85 per cent.

The company is also working on the export model of the Zen to price more competetively. The export model, which is being manufactured with 80 per cent local content, will have up to 90 per cent indigenisation level by the end of this fiscal year.

This is expected to boost MULs export performance, which sold about 30,000 cars in the overseas markets last year.

The company expects a slowdown in its domestic sales performance this year, with the rate of growth at an estimated 6-7 per cent.

The company executives expect a similar market performance next year as well due to capacity constraints.

However, Maruti expects a booming sales performance in 1999-2000 after its third plant, with an annual capacity of 100,000 cars, goes on stream in January 1999.