The Quality Advantage

The Quality Advantage Maruti Suzuki owners experience fewer problems with their vehicles than any other car manufacturer in India (J.D. Power IQS Study 2004). The Alto was chosen No.1 in the premium compact car segment and the Esteem in the entry level mid - size car segment across 9 parameters. The J.D. Power APEAL Study 2004 proclaimed the Wagon R no. 1 in the premium compact car segment and the Esteem No.1 in the entry level mid - size car segment. This study measures owner in terms of design, content, layout and performance of vehicles across 8 parameters. A Buying Experience Like No Other Maruti Suzuki has a sales network of 307 state-of -the-art showrooms across 189 cities, with a workforce of over 6000 trained sales personnel to guide our customers in finding the right car. Our high sales and customer care standards led us to achieve the No.1 nameplate in the J.D. Power SSI Study 2004. Quality Service Across 1036 Cities In the J.D. Power CSI Study 2004, Maruti Suzuki scored the highest across all 7 parameters: least problems experienced with vehicle serviced, highest service quality, best in-service experience, best service delivery, best service advisor experience, most user-friendly service and best service initiation experience.92% of Maruti Suzuki owners feel that work gets done right the first time during service. The J.D. Power CSI study 2004 also reveals that 97% of Maruti Suzuki owners would probably recommend the same make of vehicle, while 90% owners would probably repurchase the same make of vehicle Maruti Suzuki India Ltd (MSIL) launched its new compact car Ritz, a premium hatchback in India. This is MSIL’s fifth car in the segment (A2 – Zen Estilo, Wagon R, A-Star and Swift). The car will be powered by the brand new 1.2 litre K12M Petrol engine and the 1.3 DDiS Diesel power plant. These engines are compliant with BS IV, much ahead of the scheduled date of April 2010. Currently, the company has no plans to export the car. Pricing Ritz basic model is priced at Rs405,872 (petrol) and the top variant is costing Rs534,579 (diesel) exshowroom Mumbai. The pricing is very close to that of MSIL’s top-running model in the compact car segment - Swift. The comparative price range for Swift is Rs422,859- Rs537,412. MSIL has earmarked current prices of Ritz as introductory, which means possibility of a hike in future. We believe Ritz would eventually eat up into volumes of Swift. As per the management Ritz would cannibalize 8-9% of Swift’s volumes. Stiff competition The car would currently be competing against 10 products in the market – 4 MSIL, 3 Hyundai and one each from Hyundai, GM and Tata. Over next one year, many companies including Toyota, Honda, Hyundai, Fiat and Volkswagen are launching new compact cars. This would significantly increase competition in the segment.

However, MSIL with its superior brand image, loyalty and wider network of service stations, is better placed to counter the competition. Outlook Despite a weakening consumer sentiment owing to lack of credit availability and worsening economic conditions, MSIL has reported strong growth in volumes and significantly outperformed the industry. During FY09, MSIL’s market share increased by 86bps y-o-y to 52.2% in the passenger car segment. Going ahead, we expect MSIL to report 5.1% CAGR in revenues and 16.4% CAGR in PAT during FY09-11E. However, at P/E of 14.1x FY11E earnings of Rs59.7, we don’t foresee any major upsides. We downgrade the stock to MARKET PERFORMER. Post Comments

Have something to tell us? Now, you can email your press releases to afaqs! Please read the instructions before sending the press release. Maruti Suzuki releases May 2009 sales report Company Brief New Delhi, June 01, 2009 Car market leader Maruti Suzuki India Limited sold a total of 79,872 vehicles in May 2009. This includes 9,087 units for export. The company had sold a total of 69,001 vehicles in May 2008. Maruti Suzuki’s volume in the domestic A2 segment grew by 20.7 per cent while in the A3 segment the sales volume grew by 14.1 per cent during the month as compared to sales in May 2008. The month sales in C Segment grew by 25.1 per cent as compared to May 2008. The company launched its new Premium compact car Ritz during the month The sales figures for May 2009 are given below:

For further information, please contact: Adfactors PR Pvt Ltd Nivedita Sikdar Mobile: +91-9958007650 Email: [email protected] Company news index page To get news on your mobile phone, log on to m.afaqs.com. AUDITORS' REPORT

105

TO THE MEMBERS OF MARUTI SUZUKI INDIA LIMITED (Formerly Maruti Udyog Limited) 1. We have audited the attached Balance Sheet of Maruti Suzuki India Limited (Formerly Maruti Udyog Limited), as at 31st March, 2008, and the related Profit and Loss Account and Cash Flow Statement for the year ended on that date annexed thereto, which we have signed under reference to this report. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit. 2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. As required by the Companies (Auditor's Report) Order, 2003, as amended by the Companies (Auditor's Report) (Amendment) Order, 2004, issued by the Central Government of India in terms of sub-section (4A) of Section 227 of 'The Companies Act, 1956' of India (the 'Act') and on the basis of such checks of the books and records of the company as we considered appropriate and according to the information and explanations given to us, we further report that:

i) (a) The company is maintaining proper records showing full particulars including quantitative details and situation of fixed assets. (b) The fixed assets are physically verified by the management according to a phased programme designed to cover all the items, except furniture and fixtures, office appliances and certain other assets aggregating to Rupees 398 million, over a period of three years, which in our opinion, is reasonable having regard to the size of the company and the nature of its assets. Pursuant to the programme, the fixed assets have been physically verified by the management during the year and no material discrepancies between the book records and the physical inventory have been noticed. (c) In our opinion and according to the information and explanations given to us, a substantial part of fixed assets has not been disposed off by the company during the year. ii) (a) The inventory (excluding materials lying with vendors)has been physically verified by the management during the year. In respect of inventory lying with the vendors, these have substantially been confirmed by them. In our opinion, the frequency of verification is reasonable. (b) In our opinion, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the company and the nature of its business. (c) On the basis of our examination of the inventory records, in our opinion, the company is maintaining proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to book records were not material. iii) The company has not taken or granted any loans, secured or unsecured, from / to companies, firms or other parties covered in the register maintained under Section 301 of the Act. iv) In our opinion and according to the information and explanations given to us, having regard to the explanation that certain items purchased are of special nature for which suitable alternative sources do not exist for obtaining comparative quotations, there is an adequate internal control system commensurate with the size of the company and the nature of its business for the purchase of inventory, fixed assets and for the sale of goods and services. Further, on the basis of our examination of the books and records of the company, and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in the aforesaid internal control system. v) (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements referred to in Section 301 of the Act have been entered into the register maintained under Section 301 of the Act.

Auditors' Report MARUTI SUZUKI INDIA LTD.

106

Maruti Suzuki India Limited ANNUAL REPORT 2007-08

(b) In our opinion and according to the information and explanations given to us, there are no transactions made in pursuance of such contracts or arrangements and exceeding the value of Rupees Five Lakhs in respect of any party during the year, which have been made at prices which are not reasonable having regard to the prevailing market prices at the relevant time. In respect of purchase of goods and materials including components from the holding company, the prices paid for these items are not comparable as these are of special nature. vi) The company has not accepted any deposits from the public within the meaning of Sections 58A and 58AA or any other relevant provisions of the Act and the rules framed there under. vii) In our opinion, the company has an internal audit system commensurate with its size and nature of its business. viii) We have broadly reviewed the books of account maintained by the company in respect of products where, pursuant to the Rules made by the Central Government of India, the maintenance of cost records has been prescribed under clause (d) of sub-section (1) of Section 209 of the Act and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete. ix) (a) According to the information and explanations given to us and the records of the company examined by us, in our opinion, the company is generally regular in depositing undisputed statutory dues in respect of provident fund, investor education and protection fund, employees' state insurance, income tax, sales-tax, wealth tax, service tax, customs duty, excise duty, cess and other material statutory dues as applicable with the appropriate authorities. (b) According to the information and explanations given to us and the records of the company examined by us, the particulars of dues of income-tax, sales-tax, wealth tax, service tax, customs duty, excise duty and cess as at March 31, 2008 which have not been deposited on account of a dispute have been stated in Note 33 on schedule 23. x) The company has no accumulated losses as at March 31, 2008 and it has not incurred any cash losses in the financial year ended on that date or in the immediately preceding financial year. xi) According to the records of the company examined by us and the information and explanations given to us, the company has not defaulted in repayment of dues to any bank or debenture holders as at the balance sheet date. xii) The company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. xiii) The provisions of any special statute applicable to chit fund / nidhi / mutual benefit fund / societies are not

applicable to the company. xiv) In our opinion, the company is not a dealer or trader in shares, securities, debentures and other investments. xv) In our opinion and according to the information and explanations given to us, the terms and conditions of the guarantees given by the company, for loans taken by others from banks or financial institutions during the year, are not prejudicial to the interest of the company. xvi) In our opinion, and according to the information and explanations given to us, on an overall basis, the term loans have been applied for the purposes for which they were obtained. xvii) On the basis of an overall examination of the balance sheet of the company, in our opinion and according to the information and explanations given to us, there are no funds raised on a short-term basis which have been used for long-term investment. xviii) The company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Act during the year. xix) The company has no outstanding debentures as at the year end. xx) The company has not raised any money by public issue during the year.

a million promises... AUDITORS' REPORT

107

xxi) During the course of our examination of the books and records of the company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of fraud on or by the company, noticed or reported during the year, nor have we been informed of such case by the management. 4. Further to our comments in paragraph 3 above, we report that: (a) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit; (b) In our opinion, proper books of account as required by law have been kept by the company so far as appears from our examination of those books; (c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account; (d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report have been prepared in compliance with the applicable accounting standards referred to in sub-section(3C) of Section 211 of the Act; (e) On the basis of written representations received from the directors as on March 31st 2008 and taken on record by the Board of Directors, none of the directors is disqualified as on 31st March 2008 from being appointed as a

director in terms of clause (g) of sub-section (1) of Section 274 of the Act; (f) In our opinion and to the best of our information and according to the explanations given to us, the said financial statements together with the notes thereon and attached thereto give in the prescribed manner the information required by the Act and give a true and fair view in conformity with the accounting principles generally accepted in India: (i) in the case of the Balance Sheet, of the state of affairs of the company as at 31st March 2008; (ii) in the case of the Profit and Loss Account, of the profit for the year ended on that date; and (iii) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

Anupam Dhawan Membership Number-F084451 Partner For and on behalf of Place:New Delhi Price Waterhouse Date: April 24, 2008 Chartered Accountants MARUTI SUZUKI INDIA LTD.

Sustainability

The Company is currently evolving a comprehensive Sustainability Policy and Guidelines to ensure that while working to enhance shareholder wealth, interest of stakeholders continues to act as a guide for actions and decisions in the future as well.

Sustainability at Maruti Suzuki refers to sum total of all the actions and initiatives undertaken by the Company for its long-term survival and growth. To achieve longterm sustainability and prosperity the Company has nurtured a socially responsible behaviour towards its various stakeholders.

OUR STAKEHOLDERS OUR CUSTOMERS Sustainability begins with customers. The Company has a robust customer

feedback system through which it

100 Business Partners Shareholders Investors Environment Employees Customers Local Community

Maruti Suzuki India Limited ANNUAL REPORT 2007-08

a million promises... assesses the changing aspirations and requirements of customers. Over the past two decades, the Company has been successful in bringing out products that not just meet but exceed customer's expectations. The aspiration to give more for less to the customers has given the Company a competitive edge in competitive times. The VA-VE initiatives (Value Analysis & Value Engineering) pursued aggressively by the Company in partnership with suppliers have helped the Company reduce cost of making a car without compromising on quality. Every year the Company celebrates company wide Quality Month awareness programmes in association with its

suppliers. While VA-VE efforts continue all through out the year, the Company also observes a VA-VE month every year, during which it is able to create more awareness and consciousness towards the cause. A wide and deep service network spread across the country has helped the Company reach customers not only in metro cities but also in semiurban, Tier-2 and Tier-3 cities. In addition, the Company introduced many new initiatives such as car pick & drop facility by service workshops for women car owners, Maruti Mobile Support to offer door step car servicing, Express Service bays, special bays that can offer maintenance service in less than 2 hours, and so on. The Company has a stringent customer complaint monitoring system. Besides period syndicated surveys, the Company systematically compiles customer feedback and ratings on a daily basis. The findings are reported in the weekly Management Committee Meeting. This has regularly led to improvements in product quality, features, processes and customer interface. For example, feedback that

Maruti Suzuki cars were more prone to theft owing to high resale value led SUSTAINABILITY

101

the Company to develop and install an anti-theft device- the immobiliser system called i-CATS in all its new cars, much before regulatory requirement. The Company was first among all car manufacturers in the country to offer this safety device in compact cars. In manufacturing where a sizeable percentage of inputs are bought from vendors and suppliers, the ability to continuously improve quality and reduce costs is directly dependent on vendors doing the same. In light of this statement, the Company guides suppliers in adopting latest technologies, and transfers its best practices in the areas of productivity improvement, quality enhancement and cost reduction. The Company has set up Maruti Centre for Excellence (MACE) in collaboration with some of its suppliers to achieve these objectives.

OUR PARTNERS - SUPPLIERS

Golden Peacock Award For excellence in the field of

Environment Management

Sustainability Contd. With the help of MACE, now the Company is assisting its direct suppliers in upgrading their sub-suppliers or (Tier2 suppliers). Most of the suppliers and joint venture companies are located near Company's manufacturing facilities in Gurgaon and Manesar, which are sensitive areas from Industrial Relations perspective. Therefore, the Company has identified Industrial Relations and Human Resource as two important areas of interventions with suppliers. The HR team of MSIL maintains very close interaction with them on almost regular basis. The Company has been passionately building its sales and service network since its inception. The Company has set up 16 Regional Training Centres across the country to continuously upgrade skills of dealer employees as per new technologies and customers' requirements. In recent years, the Company has conducted a comprehensive national survey of its dealer employees to gauge their level of satisfaction. By many accounts, this is a rare initiative by any principal company. Based on the results

of the survey, the Company formed a cross functional team of senior management from sales, network development and HR to identify an action plan to improve satisfaction levels of dealer employees. One of the initiatives, for instance, was providing car loans at low rates of interest for good performers with repayment guarantee provided by the dealer. The Company has put in place a strong mechanism for Corporate Governance to enhance confidence of its large number

OUR PARTNERS - DEALERS SHAREHOLDERS AND INVESTORS of shareholders and investors in the Company. The Company complies with all guidelines of SEBI, Stock exchange, etc. The Company has enforced highly conducive working environment for its employees. MSIL does not support favouritism in recruitment, promotion, providing compensation, or termination based on caste, religion, gender or age. The Company offers equal opportunity for growth to all employees. During the year, the Company finalised its policy on affirmative action as per the guidelines laid down

by Confederation of Indian Industries. In March, the Company celebrated a month long Safety Awareness Drive. The drive aimed to sensitise employees and their families towards

EMPLOYEES SAFETY POLICY importance of safe working place, safer homes and need for safer traveling. The drive coincided with the National Safety Month, and was led by members of the top management. The theme of this year's Safety Drive was Hum sab ka ek hi sankalp, suraksha pratham suraksha pratham. (Together let us pledge Safety First, Safety First). Giving high priority to work place safety, Maruti Suzuki firmly believes that a plant designed to be safe is far more productive than otherwise. In light of this fact, the Company has undertaken concerted initiatives to eliminate work place mishaps, over the last 25 years. One of the most exciting exercise of this annual drive is that the employees themselves identify areas, activities and operations that could be unsafe or hazardous. Named as Kekken Yuichi Training, the end result

of the exercise is that the employee suggests

102

Maruti Suzuki India Limited ANNUAL REPORT 2007-08

a million promises... measures that are appropriate to make the work place hazard free. The Company has a vigilant policy in place that monitors issues of work place safety on a weekly basis. The Company has remained ahead of regulatory requirements in pursuit of environment protection and energy conservation at its manufacturing facilities, and in development of products that use fewer natural resources and are environment friendly. Total energy consumption at the facilities has come down by 26 percent compared to the beginning of the decade. The Company credited the Just-inTime philosophy adopted and internalised by the employees as the prime reason that helped to excel in this direction.

ENVIRONMENT From the perspective of capacity expansion, 2007-08 was one of the busiest years for the Company. The Company commissioned a new

plant for KB series engines at Gurgaon facility and the annual capacity of the Manesar plant was enhanced from 100,000 units to 170,000 units during 2007-08. Despite capacity enhancements the Company closely monitored its power and water consumption. While power consumption was lower by 30 percent and the Water consumption stood 61 percent lower that the levels of 2000-01. The CO (Carbon Dioxide) emissions

2

per vehicle (produced during manufacturing) are lower by 38 percent compared to 2000-01 levels. SUSTAINABILITY

103

ADOPTING ENERGY SAVING TECHNOLOGIES While the Company continues to improve energy saving initiatives through numerous Kaizens (continuous improvements) on the shop floor, the thrust on adopting energy saving technologies has increased phenomenally. Three-coat-one-bake painting system: The Company introduced the three-coat-one-bake system at its Manesar facilities. In this state-of-the-art painting

system, three wet-on-wet coats are applied and baked together. Conventional painting systems use two baking steps before the final finish. This facilitates lower energy consumption and yet improves the productivity levels. The green co-efficient of this system is much better than that of the conventional system.

PRACTICING 3R (REDUCE, REUSE AND RECYCLE) GREENING OF SUPPLY CHAIN COMMUNITY INITIATIVES ROAD SAFETY The Company has been promoting 3R since its inception. As a result the Company has not only been able to recycle 100% of treated waste water but also reduced fresh water consumption by 28%. The Company has implemented rain water harvesting to recharge the aquifers. Also, recyclable packing for bought out components is being actively promoted. The Company has been facilitating implementation of Environment Management System (EMS) at its suppliers' end. Regular training programmes are conducted for all the suppliers on EMS. Surveys are

conducted to assess the vendors who need more guidance. The systems and the environmental performance of suppliers are audited. The Company works closely with local communities around its manufacturing facilities to improve their quality of life. The Company has adopted four villages surrounding its Manesar plant - Kasan, Dhana, Alihar and Baas Kusla and launched sustainable livelihood programmes for under privileged communities. The initiatives are focused on four key areas: Health, Education, Employment Generation through Vocational Trainings & Basic Infrastructure Development. The Company has been playing a leading role for many years now in promoting road safety and safe driving in the Country. The Company believes that in addition to monetary support, one of the best ways for corporates to fulfill their social responsibility is by offering their managerial skills to society. In line with this, the Company manages two Institutes of Driving Training & Research (IDTR) in Delhi and Maruti Driving Schools across the country. Through these facilities, the Company has brought international

standards in driving training and state-of-the-art training infrastructure in the country. The first major step towards promoting road safety was in the year 2000 when Delhi Government invited the Company to manage the Institute of Driving Training and Research (IDTR) and start driving training courses. The Company introduced training facilities and infrastructure including world-class driving test tracks, advanced computer simulators and training modules as per international standards at the institute, which is spread over an area of 14.5 acres. Regular research in road safety and safe driving was also started at the Institute. In 2006, the second IDTR was set up to promote road safety by primarily targeting noncommercial drivers and impart driving training to them. This Institute is also equipped with the same facilities and infrastructure as made available in the first IDTR. In a landmark move, the Company signed an MoU with the Government of Gujarat, to set up, manage and run The Gujarat Regional Automobile Training Institute ( to be referred as GUJARATI) at Gajadara village of

Waghodia taluka in Vadodara district. It is the first of its kind initiative in the country. The Institute will not only provide driving training to tribal youth, it will also offer automobile technical training to them and help their employability.

SETTING UP GUJARATI Several other state governments, such as Haryana, Bihar, Uttarakhand, Chattisgarh and West Bengal have also approached the Company to set up driving training institutes in their states. The Company has already signed an MoU with the Government of Haryana for setting up two driving training institutes at Rohtak and Bahadurgarh. The Company has also involved its dealers across the Country in promoting road safety and safe driving. In collaboration with them, the Company has set up 34 Maruti Driving Schools in 32 different locations across the Country. These schools are equipped with world class, state-of-the-art driving simulators and offer beginners as well as refresher training programmes. Over 35,000 people have been trained so far.

MARUTI DRIVING SCHOOLS 104

Maruti Suzuki India Limited ANNUAL REPORT 2007-08

We believe our core values drive us in every endeavour

Starting business in 1909 as Suzuki Loom Works, the firm was incorporated in 1920. Since foundation Hamamatsu, Japan, SUZUKI has steadily grown and expanded. During the post-W.W.II period, motorized bike 'Power free' which earned a good reputation was followed by 125cc motorcycle 'Colleda', and later by the pioneering 'Suzulight' lightweight car that helped bring Japan's automotive revolution. Each of these was epoch-making in their own right as they were developed and manufactured by optimizing the most advanced technologies of that period. Today, constantly going forward to meet changing lifestyles, the SUZUKI name is seen on a full range of motorcycles, automobiles, outboard motors and related products such as generators and motorized wheelchairs.

The mark trademark is recognized by people throughout the world as a brand of quality products that offer both reliability and originality. SUZUKI stands behind this global symbol with a sure determination to maintain this confidence in the future as well, never stopping in creating such advanced 'value-packed products'.

Net sales ( 3,502,419) exceeded the pervious terms for the 9th consecutive year ( Growth of 10.7 %) Operating Income ( 149,405 Million Yen) exceeded the previous terms for the 8th consecutive year ( Growth of 12.4 %) Net Income (80, 254 Million Yen) exceeded the previous terms for the 7th consecutive year (Growth of 7%) Key achievements Japan production exceeded one million units for the 4th consecutive fiscal year and marked an all time high Overseas production reached an all time high owning especially to increased production in India & Hungary Global production exceeded two million units for the 4th consecutive year and marked an all time high. Increased exports of the Grand Vitara and SX4 to Middle and South America pushed overall exports in fiscal 2007 to a record high ( exceeded 400, 000 units for the first time)

Today, the Suzuki brand is synonymous with 'value-packed' products, which offer quality, reliability and originality. An integral part

of the Suzuki concept to deliver 'value-packed' products lies in ensuring that the company use the most modern manufacturing equipment and technologies together with factory workers and engineers. In addition, various activities are aimed at continually enhancing productivity, strict quality controls and effective communication.

Suzuki develops products for the new generation and changeable lifestyles, constantly creating new technologies and applying them to products with affluent imagination. The team covers a wide range of latest advances in energy, environment, electronics, communication, information and control applications.

For more information visit http://www.globalsuzuki.com/globalnews/index.html Suzuki positively tackles environmental issues with all its products and business activities. Suzuki is continually carrying out research for the further development of four-wheel vehicles particularly in the improvement of fuel economy and the reduction of gas emissions and noise.

In India, 'Corporate Governance' standards for listed companies are stipulated by Securities and Exchange Board of India ( SEBI) through a special provision- Clause 49 of the Listing Agreement. As a conscious and vigilant organization, Maruti Suzuki had initiated good 'Corporate Governance' practices even before Clause 49 became applicable and these practices form an integral part of the company’s governance culture. The Company strives to foster a corporate culture in which high standards of ethical behavior, individual accountability and transparent disclosure are ingrained in all its business dealings and shared by its Board of Directors, Management and Employees. The Company has established systems & procedures to ensure that its Board of Directors is well-informed and well-equipped to fulfill its overall responsibilities and to provide the management strategic direction it needs to create long-term shareholder value. On its Board, the Company has four non-Executive- Independent Directors of high stature from varied backgrounds, who bring with them rich experience and high ethical standards. In recent years, the Company has evolved a Control Self Assessment mechanism to evaluate the effectiveness of internal controls over financial reporting. Key internal controls over financial reporting were identified and put to self assessment by control owners in the form of Self Assessment Questionnaires through a web based online tool called "Control Managers" . With the successful implementation of the online Controls Self Assessment framework, the Company has become one of the few companies in India to have a transparent framework for evaluating the effectiveness of internal controls over financial reporting. The initiative further reinforces the commitment of the Company to adopt best corporate governance practices

MARUTI SUZUKI INDIA LIMITED CODE OF BUSINESS CONDUCT AND ETHICS

INTRODUCTION & BACKGROUND As a responsible corporate citizen, Maruti Suzuki India Limited (‘Maruti’ or “the Company”) has always believed in following highest standards of Corporate Governance. Being a listed Company, every act of the Company, its Board Members and its employees is the focus of public attention and accordingly, there is a need to reinforce Maruti’s commitment towards maintaining highest standards of Corporate Governance. This Code of Business Conduct and Ethics (“Code of Conduct” or “Code”) helps ensure compliance with our standards of business conduct & ethics and also with regulatory requirements. All Senior Management Personnel are expected to read and understand this Code of Business Conduct and Ethics, uphold these standards in day-to-day activities and also comply with all applicable standards, policies and procedures of the company. This policy should be read in conjunction with applicable regulations & existing policies & procedures of the Company. You can also contact the Secretarial & Legal Department if you have any questions or clarifications. APPLICABILITY This Code of Conduct is applicable to all Senior Management Personnel which would include the directors of the Company, the top management personnel (i.e., executive directors & advisors at executive director level) & all functional heads (including management personnel with direct functional reporting to directors & top management personnel). All Senior Management Personnel are expected to comply with the letter and spirit of this Code. The Senior Management Personnel should continue to comply with other

applicable laws & regulations and the relevant policies, rules and procedures of the Company. The Code comes into immediate effect INTERPRETATION OF THE CODE In this Code the term “Relative” shall have the same meaning as defined in Section 6 of the Companies Act, 1956. In this Code, words importing the masculine shall include feminine and words importing singular shall include the plural or vice versa. Any question or interpretation under this Code of Business Conduct and Ethics will be considered and dealt with by the Board or any person authorized by the Board on their behalf. COMPLIANCE WITH APPLICABLE LAWS & REGULATIONS Senior Management Personnel must comply and where applicable, oversee compliance by employees with all the laws, rules and regulations applicable to the Company and its employees. Each Senior Management Personnel must acquire appropriate knowledge of the requirements relating to his duties sufficient to enable him to recognize potential non compliance issues and to know when to seek advice from the Legal Department on specific Company policies and procedures. No payment or transaction should be made or undertaken, by a Senior Management Personnel or authorized or instructed to be made or undertaken by any other person or the Company if the consequence of that transaction or payment would be the violation of any law in force. HONESTY, INTEGRITY & ETHICAL CONDUCT Senior Management Personnel shall act in accordance with the highest standards of integrity, honesty, fairness and ethical conduct while working for the Company as well when representing the Company.

Honest conduct means conduct that is free from fraud or deception. Integrity & ethical conduct includes ethical handling of actual or apparent conflicts of interest between personal and professional relationships. Mr. R. C. Bhargava

Chairman

Mr. Amal Ganguli

Director

Mr. Osamu Suzuki

Director

Mr. Kenichi Ayukawa

Mr. Shinzo Nakanishi

Managing Director and CEO

Mr. D. S. Brar

Director

Mr. Shuji Oishi

Director

Mr. Tsuneo Ohashi

Mr. Manvinder Singh Banga

Director

Mr. Keiichi Asai

Director

Ms. Pallavi Shroff

Director

Director

Director and Managing Executive Officer (Production)

Maruti Suzuki sales in May 2009 New Delhi, June 01, 2009 Car market leader Maruti Suzuki India Limited sold a total of 79,872 vehicles in May 2009. This includes 9,087 units for export. The company had sold a total of 69,001 vehicles in May 2008. Maruti Suzuki's volume in the domestic A2 segment grew by 20.7 per cent while in the A3 segment the sales volume grew by 14.1 per cent during the month as compared to sales in May 2008. The month sales in C Segment grew by 25.1 per cent as compared to May 2008. The company launched its new Premium compact car Ritz during the month The sales figures for May 2009 are given below:

Segment Models

In May

Till May

2009

2008

% Change

2009-10

2008-09

% Change

April'08 March'09

A1

M800

2336

6830

-65.8%

4681

11288

-58.5%

49383

C

Omni, Versa

7619

6092

25.1%

15343

13797

11.2%

77948

A2

Alto, Wagon-R, Zen, 53760 Swift, A-star

44539

20.7%

100577

87660

14.7%

511396

A3

SX4, Dzire

6782

5946

14.1%

13848

10133

36.7%

75928

70497

63407

11.2%

134449

122878

9.4%

714655

736

-60.9%

1193

804

48.4%

7489

Total Passenger Cars MUV

Grand Vitara *, Gypsy 288

Domestic

70785

64143

10.4%

135642

123682

9.7%

722144

Export

9087

4858

87.1%

15978

7655

108.7%

70023

Total Sales

79872

69001

15.8%

151620

131337

15.4%

792167

* A-star launched in November 2008, Ritz launched in May 2009.

Stylish, Spacious, India's first BS-IV compliant fuel efficient Passenger car New Delhi, May 15, 2009

India's number one carmaker Maruti Suzuki India Limited unveiled the much-awaited Ritz here today. The car is available in both, petrol and diesel engine options. With the Ritz - a Superior stance hatchback positioned at the premium-end of the compact car market - Maruti Suzuki consolidates its leadership in the highly competitive compact car segment. The Ritz comes with the BS-IV and OBD-I compliance much ahead of the regulation being enforced in the country. The company commands the largest market share of 58 per cent in the compact car (A2) segment. The Ritz has been specifically designed for India. Maruti Suzuki engineers worked with the Suzuki design team in Japan to co-design the car and carry out India-specific changes. Unveiling the Ritz, Shinzo Nakanishi, Managing Director and CEO, Maruti Suzuki India Limited said, "The Ritz combines modern European design, the sportiness of the Swift, the latest in engine technology and Suzuki's globally acclaimed expertise in compact cars. The Ritz further reiterates parent Suzuki Motor Corporation's commitment to bring global car models with contemporary design, style and next generation fuel efficient, environment friendly engine technology for its customers in India. The Ritz is one more step by Indian engineers towards capability development in automobile research and design." The heart of the Ritz are the brand new 1.2 Litre K12M Petrol engine and the 1.3 DDiS Diesel power-plant, each offering optimum performance and fuel efficiency. Alongside this, the transmission system has been optimized for the Ritz to match Indian driving habits. With this the Ritz offers the best-in-class combination of fuel efficiency and drivability. A car for everyone With its overall length of 3.7 metres height of 1.6 metres and a width of 1.7 metres, the Ritz offers a comfortable roomy cabin with ample legroom for 5 adults. Despite its large frame, the Ritz has a tight turning radius of 4.7 meters. The suspension of the vehicle with a high ground clearance of 170 mm has been tuned for Indian road conditions, and provides excellent handling and ride comfort. The rear wheel housing has been modified to accommodate the bigger and wider tyres used only in Ritz. The customer will find a fine balance between Emotion and Functionality in the Ritz. Being a car meant for the family, the rear seat has been designed for comfortable seating of three passengers. The seat profile has been modified for better comfort and to add to overall interior synergy. As a first in the industry, two sets of dual-tone instrument panels that blend with the body colours are offered in the ZXi version. Maruti Suzuki Ritz: Superior Technology all the way In Ritz, Maruti Suzuki brings innovative technologies for benefit of customers and the society.

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Ritz is the first passenger car in India to be tested and verified for EMC (Electro Magnetic Compatibility) compliance. EMC standards are prevalent in European countries and Maruti Suzuki as the market leader has adopted them proactively.

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The Ritz is ELV compliant (no use of ecologically harmful substances such as chromium, cadmium, mercury, etc). ELV (End of Life Vehicle) norms are prevalent in Europe for ensuring recyclability of material but are yet to be enforced in India.

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In line with the Government of India's intention to introduce ethanol blended fuel, Maruti Suzuki has made design modifications to make Ritz E10 compliant.

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The Ritz comes with Drive-by-wire technology in both petrol and diesel variants. This alongwith the 32-bit Engine Management system provides faster signal processing and quick response..

The Heart of the Ritz The Ritz will be available with two different power-train options:

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a 1.2-litre, four-cylinder, 16-valve unit with maximum power of 85PS petrol engine (Superb fuel efficiency of 17.7 kmpl: Certified as per CMVR rule 115)

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the successful 1.3-litre, Common Rail 16-valve diesel (DDiS) unit that delivers a maximum power of 75PS. (Excellent fuel efficiency of 21.1 kmpl: Certified as per CMVR rule 115)

The all-new K12M engine on the Ritz Petrol has been specifically designed for Indian applications. The BS-IV and OBD-1 compliant engine promises to be best in class fuel efficient, high performance, low emission, light weight, with lower NVH (Noise, Vibration & Harshness). To make the all-aluminium engine lighter and more fuel efficient, high grade plastic parts have been extensively used. The skirt area of the piston has been shortened to reduce weight, which helps in lowering friction and enhance fuel efficiency. Maruti Suzuki engineers worked as part of Suzuki's engine teams for design, calibration and testing of the engine in Japan and in India. This is a step further in enhancing the engine development capability. Some other salient features of the all-new K12M are:

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Innovative rocker-less DOHC cam shaft, plastic intake manifold and offset crank shaft with low tension rings to reduce losses and improve fuel efficiency

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Smart Distributor Less Ignition (SDLI) system with dedicated plug top coils, High pressure fuel system & advanced injectors for superior atomization to provide uniform and optimized combustion for better performance.

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Optimized cylinder block, light piston and nut-less con rod for light weight configuration

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Improved engine stiffness and use of advanced technology like silent timing chain to improve NVH characteristics

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First engine oil change after 10,000 kms as against conventional 1,000 kms

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Spark plugs first change at 40,000 kms as against conventional 20,000 kms

The Ritz Diesel is powered by the super successful 1.3L DDIS powerhouse, which propels the Swift and Swift Dzire. The engine configuration has been modified to meet the forthcoming BS-IV and OBD-1 norms and the improved calibration and tuning provides excellent combination of driveability and mileage Exterior delight The exterior design of the Ritz embodies energy, youthfulness, and delight. Sharp lines, bold contours and flowing roofline give an appealing look and youthful sporty stance. The strong V-identity of Suzuki design language in the front is well supported by expressive headlamps. The pronounced fender flairs add solidness and sporty character. The side view is characterized by dynamic shoulder and sculpted character supporting it above the sill. The stylish boomerang-shaped, rear combination lamps are placed at the rear corners so as to maximize the visual width. The stylish rear bumper incorporates reflex reflectors and RR fog lamp, adding to its character and overall styling of the vehicle to suit Indian requirements. Youthful and useful Interiors The design theme for interior is youthful and useful. The interior is focused on enjoyment and "ease of use" concept. The wrap-around character of the instrument panel brings in a feeling of freshness. The console mounted gear shift lever - another first in Maruti Suzuki cars - is an ergonomic delight for the driver and sets the interiors apart, visually.

Streamlined center console accentuated by the easy flowing silver garnish adds uniqueness. The repeating oval motif forms rhythm in the interiors. The cabin features a contemporary look defined by gentle curves and blue-toned colour scheme. A high panoramic roof gives passengers a sense of openness. The Ritz comes with 'steering integrated audio control' that is a hallmark for contemporary cars. Stance & Space The Ritz while being based on the Swift platform has a superior stance. The seating in Ritz has been moved upward by 54mm in the front and 47mm in the rear, providing a comfortable seating and panoramic driving position. With an overall vehicle height of 1620 mm enabling higher head room (+24mm in front and +31mm in rear), it allows for ample occupant space in the Ritz. This ergonomic layout provides the best in class leg room and head room along with ease of entry and exit to passengers. Safety & Security Ritz comes with a rigid and light weight body structure with crumple zones. The safety equipments of the Ritz includes an energyabsorbing structure, Airbags, ABS with EBD, a collapsible steering column, front seat-belt pre-tensioners and force limiters (Specifications vary according to variants). All variants of Ritz are equipped with Maruti's iCATS Immobiliser system to provide much required security to the customers. Groovy Variants The car will be available in five variants, three variants with petrol engine - LXi, VXi and ZXi and two variants with Diesel engine - LDi and VDi. While Airbags and ABS are standard on ZXi, the Vxi and VDi variants have ABS as an optional feature. Hip Colours The Ritz comes in an array of eight vibrant colours including 5 new ones: Glistening Grey *

Racing Green *

Bakers Chocolate *

Firebrick Red *

Blue Blaze *

Silky Silver

Midnight Black

Superior White

* New colours Price: Introductory Prices of Maruti Suzuki RITZ in DELHI are: Petrol Variants

C li

Diesel Variants

Model

City

Ex-Showroom (Rs)

Model

City

Ex-Showroom (Rs)

Ritz Lxi

Delhi

3.90 lakh

Ritz Ldi

Delhi

4.65 lakh

Ritz Lxi

Delhi

4.20 lakh

Ritz Ldi

Delhi

4.99 lakh

Ritz Lxi

Delhi

4.80 lakh

c k o n t h e i m a g e t o d o w nl o a d a hi g h r e s ol u ti o n i m a g e s

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Abstract: The case study outlines the transformation of Maruti Suzuki India Private Ltd. (Maruti) from a state-owned company to a dominant market player (with protectionism all around) and also to an effective competitor (in the era of increased and intensified competition from domestic and foreign players). Beginning with its inception as Maruti Udyog Ltd. (MUL), the case study progresses towards its market entry, growth, expansion, turnaround and competitive strategies to establish and strengthen its presence in the Indian passenger car market. The case study also highlights Maruti’s strategies to counter intensified competition and external conditions like global economic recession, the resultant credit crunch and its impact on sales volume. Given its successful corporate transformation over the past 25 years, there arises the dilemma whether it can adopt proven strategies of the evolutionary phase to the new revolutionary phase of another 25 years or so? Further, amid challenging industrial and economic conditions, what are the growth options for Maruti Suzuki to ensure future growth sustenance and profitability? Pedagogical Objectives: •

To understand the historical state-connections of MUL and to debate over the necessity of government to start an automobile company

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To examine and debate over Maruti’s competitive strategies during three different phases of its 25 years – (1981–1991), (1992–1999) and (2000–2008)

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To explore growth options available for Maruti

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To analyse all the impending challenges and suggest ways and means to overcome them.

Keywords : Maruti, Suzuki, India, Asia, Corporate Transformation, New product introduction, global strategy, marketing; promotion, Growth Strategies, Automobile, new entrants, competition, market leader

Abstract: The case highlights the pricing strategy of Maruti Udyog Limited (MUL), the market leader in the Indian passenger car industry. MUL has launched various models catering to all market segments at various price points. The case provides a brief note on the various models of MUL, their prices and their features. It specifically focuses on the competition between two of MUL's best selling models - the M800 and Alto. MUL reduced the price difference between these two models positioning them on an almost equal platform, which resulted in confusion in the minds of consumers and industry analysts. M800 had ruled the passenger car market as the only car in the entry-level segment in the Indian automobile industry and was now facing the danger of cannibalization from one of its own family members, Alto. The case highlights the pricing dilemma faced by MUL and leads to a debate on the right pricing strategy for the company and the future of its flagship product M800.

Issues: The case is so structured to enable the students to: • Gain insights into the recent trends in the Indian passenger car industry due to the changing economic and business conditions. • Examine how MUL's aggressive pricing strategy helped the company to retain its leadership position amidst fierce competition by foreign players in India. • Critically analyze the pricing strategy of MUL and determine the rationale of having several product models at various price points. • Arrive at possible solutions for the current pricing dilemma of MUL.

Contents: The Competition Background Note The Product Line The Pricing Strategy

Page No. 1 2 3 5

Promotion and Distribution The Result Exhibits

6 8 10

Keywords: "There is absolutely no question of phasing out the Maruti 800. Why would anybody want to stop producing the car that is selling so well? As long as the customer demands it, we will continue to produce the 800."1 - Jagdish Khattar, Managing Director, Maruti Udyog Limited. "There is no fault in what Khattar is doing. Upgrading people from two-wheelers is a great idea. But there is one problem. This is the high-volume-low-margin game. If volumes don't come through, the company could be in trouble."2 - Rama Bijapurkar, Strategic Marketing Consultant.

The Competition Since 1985, Maruti Udyog Limited (MUL) has been the market leader in the passenger car industry in India. Its flagship product - M800 had the distinction of being the largest selling car model in India since its launch in December 1983. Positioned as people's car, M800 ruled the Indian passenger car market and remained unchallenged ever since it occupied the top slot, five months after its introduction. In March 2003, MUL sold 20,687 units of M800, the highest ever sales by any single model in a month. It was also the highest sales since M800 debuted, surpassing its previous monthly high of 18,735 units in August 1999. For the first few months of 2004, M800 performed well, selling 15,301 units in January, 13,518 units in February and 15,540 in March. But gradually Alto, another MUL product, began eating into M800's share. Alto reported sales of 8,399 units, 8,324 and 9,011 units in January, February and March respectively. In April, its sales increased to 9,350 units and in May 2004, Alto took over M800's position as the largest selling car with sale of 10,373 units, slightly over M800's sales of 10,016 units. Analysts felt that Alto had taken the top spot

because of its price reduction in September 2003 by Rs. 23,000 followed by the launch of the nonAC Alto for Rs. 0.23 mn in the first week of April 2004. On reducing the gap between its bread and butter model M800 and its compact car Alto, MUL said it had "long term" plans for M800. Commenting on Alto's pricing strategy, Jagdish Khattar (Khattar), managing director of MUL, said, "The new price positioning of the Alto would cannibalize existing A1 segment product the M800 which is also considered an old model.

The Competition Contd... But, the cannibalization will remain within the Maruti family and the bigger numbers will help Maruti depreciate Alto faster. Net M800 sales may be less but we would be pushing more Alto and the more we sell the Alto the faster it will depreciate."3 Though industry analysts said this move would boost MUL's profits, they also expressed their views that MUL's long-term plan might be to discontinue M800 and replace the entry segment with Alto. However, Khattar clarified that MUL's pricing strategy was not meant to replace M800 with Alto. He said, "Now, we have two cars in entrylevel. Maruti 800 is still a dream of Indians, how can I replace it?"4

Background Note In its efforts to fulfill the growing demand for personal transport vehicles, the Government of India (GoI) established MUL in February 1981 through an Act of Parliament. It was incorporated to take over the assets of the erstwhile Maruti Limited set up in June 1971 and wound up by High Court order in 1978. In October 1982, the GoI signed a joint venture agreement with Suzuki Motor Corporation (SMC) of Japan. MUL received technology support from SMC. On the other hand, SMC got support from the Indian government, which helped it get import clearances for manufacturing equipment and

obtain land for its factory. At the time of its establishment, the objectives of MUL were: • Modernization of the Indian automobile industry. • Production of fuel-efficient vehicles to conserve scarce resources. • Production of large number of motor vehicles, which was necessary for growth. In an era when owning a car was a distant dream for a vast majority of Indians, MUL rolled out its first car, the M800. The company labeled it a people's car, with a 796cc 3-cylinder engine that delivered 39.5bhp at an affordable price of Rs. 65,000. The first vehicle was released for sale in December 1983. Initially, the car was criticized for its diminutive size, but it proved to be spacious enough to carry four adults...

The Product Line The Indian passenger car market was divided into various segments and sub-segments on the basis of price, size (i.e. length of the model and its weight) and other factors (including engine capacity). MUL had a presence in all the segments and sub-segments...

The Pricing Strategy Due to the fierce competition in the Indian passenger car industry, price emerged as an important factor affecting the purchasing decisions of customers. Since it had been in the industry for more than two decades, and as a market leader, MUL adopted aggressive pricing strategies. The company had products at various price points (Refer Exhibit IV for a comprehensive list of MUL's products, their variants and prices). In the early 2000s, when the passenger car industry was witnessing stagnation, MUL slashed the prices of its various models, to revive the industry...

Promotion and Distribution

In the early 2000s, MUL also focused on promotion and distribution to face intense competition. The company devised various innovative promotional strategies. With interest rates declining from 12% to as low as 8% in automobile finance, MUL used financing as a major tool to drive up its car sales. The overall percentage of cars being financed through automobile loans increased from 65% in 1998 to over 85% in 2003...

The Result By 2004, the competition in the Indian passenger car industry had further intensified. However, MUL retained its leadership position mainly due to its aggressive pricing strategy. In December 2004, MUL reported an 18% rise in vehicle sales helped by a sharp increase in exports and rising demand in the domestic market. Domestic sales increased by 11.4 percent amounting to 37,153 units, while exports jumped 78 percent to 6,675 units. After the price reductions and aggressive promotion, M800 and Alto sold in huge volumes in India... KEY STRATEGIC INITIATIVES BY MARUTI A) TURNAROUND STRATEGIES MARUTI FOLLOWED Maruti was the undisputed leader in the automobile utility-car segment sector, controlling about 84% of the market till 1998. With increasing competition from local players like Telco, Hindustan Motors, Mahindra & Mahindra and foreign players like Daewoo, PAL, Toyota, Ford, Mitsubishi, GM, the whole auto industry structure in India has changed in the last seven years and resulted in the declining profits and market share for Maruti. At the same time the Indian government permitted foreign car producers to invest in the automobile sector and hold majority stakes. In the wake of its diminishing profits and loss of market share, Maruti initiated strategic responses to cope with India’s liberalization process and began to redesign itself to face competition in the Indian market. Consultancy firms such as AT Kearney & McKinsey, together with an internationally reputed OD consultant, Dr. Athreya, have been consulted on modes of strategy and organization development during the redesign process. The redesign process saw Maruti complete a Rs. 4000 mn expansion project which increased the total production capacity to over 3,70,000 vehicles per annum. Maruti executed a plan to launch new models for different segments of the market. In its redesign plan, Maruti, launches a new model every year, reduce production costs by achieving 85-90% indigenization for new models, revamp marketing by increasing the dealer network from 150 to 300 and focus on bulk institutional sales, bring down number of vendors and introduce competitive bidding. Together with the redesign plan, there has been a shift in business focus of Maruti. When Maruti commanded the largest market share,

business focus was to “sell what we produce”. The earlier focus of the whole organization was "production, production and production" but now the focus has shifted to "marketing and customer focus". This can be observed from the changes in mission statement of the organization: 1984: "Fuel efficient vehicle with latest technology". 1987: "Leader in domestic market and be among global players in the overseas market". 1997: "Creating customer delight and shareholders wealth". Focus on customer care has become a key element for Maruti. Increasing Maruti service stations with the scope of one Maruti service station every 25 km on a highway. To increase its market share, Maruti launched new car models, concentrated on marketing and institutional sales. Institutional sales, which currently contributes to 7-8% of Maruti’s total sales. Cost reduction and increasing operating efficiency were another redesign variable. Cost reduction is being achieved by reaching an indigenization level of 85-90 percent for all the models. This would save foreign currency and also stabilize prices that fluctuate with exchange rates. However, change in the mindset was not as fast as required by the market. Maruti planned to reduce costs, increase productivity, quality and upgrade its technology (Euro I&II, MPFI). In addition, it followed a high volume production of about 400,000 vehicles / year, which entailed a smooth relationship between the workers and the managers. Post 1999, the market structure changed drastically. Just before this change, Maruti had wasted two crucial years (1996-1998) due to governmental interventions and negotiation with Suzuki of Japan about the break-up of the share holding pattern of the company. There was a change in leadership, Mr. Sato of Suzuki became the Chairman in June 1998, and the new Mr.J. Khatter was appointed as the new Joint MD. Khatter was a believer in consensus decision making and participative style of management.As a result of the internal turmoil and the changes in the external environment, Maruti faced a depleting market share, reducing profits, and increase in inventory levels, which it had not faced in the last 18 years. After their fall in market share they redesigned their strategies and through their parent company Suzuki they learned a lot.The organizational learning of Maruti was moderately successful, the cost was relatively inexpensive as Maruti had its strong Japanese practices to fall back upon. With the program of organizational redesign, rationalization of cost and enhanced productivity, Maruti bounced back to competition with 50.8% market share and 40% rise in profit for the FY2002-2003. B) CURRENT STRATEGIES FOLLOWED BY MUL I.

PRICING STRATEGY - CATERING TO ALL SEGMENTS

Maruti caters to all segment and has a product offering at all price points. It has a car priced at Rs.1,87,000.00 which is the lowest offer on road. Maruti gets 70% business from repeat buyers who earlier had owned a Maruti car. Their pricing strategy is to provide an option to every customer looking for up gradation in his car. Their sole motive of having so many product offering is to be in the consideration set of every passenger car customer in India. Here is how every price point is covered.

II. OFFERING ONE STOP SHOP TO CUSTOMERS OR CREATING DIFFERENT REVENUE STREAMS Maruti has successfully developed different revenue streams without making huge investments in the form of MDS, N2N, Maruti Insurance and Maruti Finance. These help them in making the customer experience hassle free and helps building customer satisfaction. Maruti Finance: In a market where more than 80% of cars are financed, Maruti has strategically entered into this and has successfully created a revenue stream for Maruti. This has been found to be a major driver in converting a Maruti car sale in certain cases. Finance is one of the major decision drivers in car purchase. Maruti has tied up with 8 finance companies to form a consortium. This consortium comprises Citicorp Maruti, Maruti Countrywide, ICICI Bank, HDFC Bank, Kotak Mahindra, Sundaram Finance, Bank of Punjab and IndusInd Bank Ltd.( erstwhile-Ashok Leyland Finance). Maruti Insurance : Insurance being a major concern of car owners. Maruti has brought all car insurance needs under one roof. Maruti has tied up with National Insurance Company, Bajaj Allianz, New India Assurance and Royal Sundaram to bring this service for its customers. From identifying the most suitable car coverage to virtually hassle-free claim assistance it's your dealer who takes care of everything. Maruti Insurance is a hassle-free way for customers to have their cars repaired and claims processed at any Maruti dealer workshop in India. True Value – Initiative to capture used car market Another significant development is MUL's entry into the used car market in 2001, allowing customers to bring their vehicle to a 'Maruti True Value' outlet and exchange it for a new car, by paying the difference. They are offered loyalty discounts in return.This helps them retain the customer. With Maruti True Value customer has a trusted name to entrust in a highly unorganized market and where cheating is rampant and the biggest concern in biggest driver of sale is trust. Maruti knows its strength in Indian market and has filled this gap of providing trust in Indian used car market. Maruti has created a system where dealers pick up used cars, recondition them, give them a fresh warranty, and sell them again. All investments for True Value are made by dealers. Maruti has build up a strong network of 172 showrooms across the nation. The used car market has a huge potential in India. The used car market in developed markets was 2-3 times as large as the new car market. N2N: Car maintenance is a time-consuming process, especially if you own a fleet. Maruti’s N2N Fleet Management Solutions for companies, takes care of the A-Z of automobile problems. Services include end-to-end backups/solutions across the vehicle’s life: Leasing, Maintenance, Convenience services and Remarketing. Maruti Driving School (MDS): Maruti has established this with the goal to capture the market where there is inhibition in buying cars due to inability to drive the car. This brings that customer to Maruti showroom and Maruti ends up creating a customer. III. REPOSITIONING OF MARUTI PRODUCTS Whenever a brand has grown old or its sales start dipping Maruti makes some facelifts in the models. Other changes have been made from time to time based on market responses or

consumer feedbacks or the competitor moves. Here are the certain changes observed in different models of Maruti. Omni has been given a major facelift in terms of interiors and exteriors two months back. A new variant called Omni Cargo, which has been positioned as a vehicle for transporting cargo and meant for small traders. It has received a very good response from market. A variant with LPG is receiving a very good response from customers who look for low cost of running. Versa prices have been slashed and right now the lowest variant starts at 3.3 lacs. They decreased the engine power from 1600cc to 1300cc and modified it again considering consumers perception. This was a result of intensive survey done all across the nation regarding the consumer perception of Versa. Esteem has gone through three facelifts. A new look last year has helped boost up the waning sales of Esteem. Baleno was launched in 1999 at 7.2 lacs. In 2002 they slashed prices to 6.4 lacs. In 2003 they launched a lower variant as Baleno LXi at 5.46 lacs. This was to reduce the price and attract customers. Wagon-R was perceived as dull boxy car when it was launched. This made it a big failure on launch. Then further modifications in engine to increase performance and a facelift in the form of sporty looking grills on the roof. Now it’s of the most successful models in Maruti stable. Zen has been modified four times till date. They had come up with a limited period variant called Zen Classic. That was limited period offer to boost short term sales. Maruti 800 has so far been facelifted two times. Once it came with MPFi technology and other time it came up with changes in front grill, head light, rear lights and with round curves all around. IV. CUSTOMER CENTRIC APPROACH Maruti’s customer centricity is very much exemplified by the five times consecutive wins at J D Power CSI Awards. Focus on customer satisfaction is what Maruti lives with. Maruti has successfully shed off the public- sector laid back attitude image and has inculcated the customerfriendly approach in its organization culture. The customer centric attitude is imbibed in its employees. Maruti dealers and employees are answerable to even a single customer complain. There are instances of cancellation of dealerships based on customer feedback. Maruti has taken a number of initiatives to serve customer well. They have even changed their showroom layout so that customer has to walk minimum in the showroom and there are norms for service times and delivery of vehicles. The Dealer Sales Executive, who is the first interaction medium with the Maruti customer when the customer walks in Maruti showroom, is trained on greeting etiquettes. Maruti has proper customer complain handling cell under the CRM department. The Maruti call center is another effort which brings Maruti closer to its customer. Their Market Research department remains on its toes to study the changing consumer behaviour and market needs.Maruti enjoys seventy percent repeat buyers which further bolsters their claim of being customer friendly. Maruti is investing a lot of money and effort in building customer loyalty programmes.

V. COMMITTED TO MOTORIZING INDIA Maruti is committed to motorizing India. Maruti is right now working towards making things simple for Indian consumers to upgrade from two-wheelers to the car. Towards this end, Maruti partnerships with State Bank of India and its Associate Banks took organized finance to small towns to enable people to buy Maruti cars. Rs. 2599 scheme was one of the outcomes of this effort. Maruti expects the compact cars, which currently constitute around 80% of the market, to be the engine of growth in the future. Robust economic growth, favorable regulatory framework, affordable finance and improvements in infrastructure favor growth of the passenger vehicles segment. The low penetration levels at 7 per thousand and rising income levels will augur well for the auto industry. Maruti is busy fine-tuning another innovation. While researching they found that rural people had strange notions about a car - that the EMI (equated monthly instalments) would range between Rs 4,000 and Rs 5,000. That, plus another Rs 1,500-2,000 for monthly maintenance, another Rs 1,000 for fuel (would be the cost of using the car). To counter that apprehension, the company is working on a novel idea. Control over the fuel bill is in the consumer's hands. But, maintenance need not be. Says Khattar: "What the company is doing now is saying how much you spend on fuel is in your hands anyway. As far as the maintenance cost is concerned, if you want it that way, we will charge a little extra in the EMI and offer free maintenance." VI. DISINVESTMENT AND IPO OF MARUTI UDYOG LIMITED It was a long and tough journey, but a rewarding one at the end. A reward worth Rs 2,424 crore, making it the biggest privatization in India till date. The size of Maruti’s sell- off deal is proof of its success. On the investment of Rs 66 crore it made in 1982, when Maruti Udyog Limited (MUL) was formally set up, the sale represents a staggering return of 35 times The best part of the deal is the Rs 1,000 crore control premium the Government has been able to extract from Suzuki Motor Corporation for relinquishing its hold over India’s largest car company. Now looking at the strategy point of it – for Suzuki, of course, complete control of MUL means a lot. Maruti is its most profitable and the largest car company outside Japan. Suzuki will now be in the driver’s seat and will not have to mind the whims and fancies of ministers and bureaucrats. “Decisions will now become quicker. The response to changing market conditions and technological needs will be faster,” says Jagdish Khattar, managing director, MUL. After the disinvestment Suzuki became the decision maker at MUL. They flowed fund in India for the major revamp in MUL. Quoting from the report that appeared in The Economic Times, 4th April 2005, The Indian car giant Maruti Udyog Limited has finalized its two mega investment plans — a new car plant and an engine and transmission manufacturing plant. Both the projects will be implemented by two different companies. At its meeting the company's board approved a total investment of Rs3,271.9 crore for these two ventures, which will be located in Haryana. The above signifies when GOI was a major stakeholder in the MUL strategies which lead to investment have had a bureaucracy factor in it but after the disinvestment strategy followed is a TOP DOWN approach with a fast implementation.

Suzuki's proposed two-wheeler facility in India, would start making motorcycles and scooters by the end of 2005 through a joint venture, in which Maruti has 51 per cent stake. The two-wheeler unit will have a capacity of 250,000 units a year. The disinvestment followed by IPO gives the insight in the fact that now all the strategic decisions are taken by Maruti Suzuki Corporation. Disinvestment had helped by removing the red tape and bureaucracy factor from its strategic decision making process. VII. REALISATION OF IMPORTANCE OF VEHICLE MAINTENANCE SERVICES MARKET In the old days, the company's operations could be boiled down to a simple three-box flowchart. Components came from the 'vendors' to the 'factory' where they were assembled and then sent out to the 'dealers'. In this scheme, you know where the company's revenues come from. The new scheme is more complicated. It revolves around the total lifetime value of a car. Work on this began in 1999, when a MUL team, wondering about new revenue streams, traveled across the world. Says R.S. Kalsi, general manager (new business), MUL: "While car companies were moving from products to services, trying to capture more of the total lifetime value of a car, MUL was just making and selling cars." If a buyer spends Rs 100 on a car during its entire life, one-third of that is spent on its purchase. Another third went into fuel. And the final third went into maintenance. Earlier, Maruti was getting only the first one-third of the overall stream. As the Indian market matured, customers began to change cars faster. Says Kalsi: "So the question was, if a car is going to see three users in, say, a life span of 10 years, how can I make sure that it comes back to me each time it changes hands ? So Maruti has changed gears to take a big share of this final one-third spent on maintenance. Maintenance market has a huge market potential. Even after having fifty lakh vehicles on road Maruti is only catering to approximately 20000 vehicles through its service stations everyday. For this they are conducting free service workshops to encourage consumers to come to their service stations. Maruti has increased its authorized service stations to 1567 across 1036 cities. Every regional office is having a separate services and maintenance department which look after the growth of this revenue stream. VIII. PLAYING ON COST LEADERSHIP Maruti is the price dictator in Indian automobile industry. It’s the low cost provider of car. The lowest car on road is from Maruti stable i.e. Maruti 800. Maruti achieves this through continuous improvements in operational efficiency and productivity. The company has set itself (and its vendors) the target of a 50% improvement in productivity and a 30% reduction in costs in three years. The ability to keep lowering the prices sets Maruti apart from other players in the league. Maruti spread the overheads over a larger base. The impressive sales and profits were the result of major efforts within the company. Maruti also increased focus on vendor management. Maruti consolidated its vendor base. This has provided its vendors with higher volumes and higher efficiencies. Maruti does that by working with vendors, assuring them that for every drop in price, volumes will go up. Maruti is now

encouraging its vendors to develop R&D capability for specialized components. Based upon such activities, product competitiveness in the market will further increase. Maruti also made strides in applying IT to manufacturing. A new Vehicle Tracking System improved efficiency on the shop floor and enhanced quality control. The e Nagare system, adopted from Suzuki Motor Corporation, smoothened Maruti’s Just In Time operations. C) MAJOR FUTURE STRATEGIES I. PHASING OUT ZEN IN 2007 The launch of Swift and phasing out Zen is a strategic move. Alto was launched keeping in mind that it will take over Maruti 800 market in future. Perhaps being the flagship product phasing out of Maruti 800 faced lots of resistance from dealers all over. Another reason behind not phasing out Maruti 800 was the fear of brand shift of customers to other competitor’s product. Swift was launched in May, 2005 in the price band starting from 4 lacs. Before launch of Swift Maruti management had decided that they will phase out Zen since it had already came up with two modifications. The major reason behind this decision was cannibalization of Wagon R and Swift due to overlapping of price band. It is a rational decision to kill a product before it starts facing the decline stage in product cycle. Maruti is offering Rs. 3000.00 more margins to dealer on the sale of Wagon-R as compared to Zen. This is to let dealer push Wagon R instead of Zen. II. MARUTI PLANS FOR A BIG DIESEL FORAY The new car manufacturing company, called Maruti Suzuki Automobiles India Limited, will be a joint venture between Maruti Udyog and Suzuki Motor Corporation holding a 70 per cent and 30 per cent stake respectively. The Rs1,524.2 crore plant will have a capacity to roll out 1 lakh cars per year with a capacity to scale up to 2.5 lakh units per annum. The new car manufacturing plant will begin commercial production by the end of 2006. Maruti would set up a diesel engine plant at Gurgaon in line with its plan to become a major player in diesel vehicles in a couple of years. This has been done in the wake of major competition from Tata Indica and meets the growing demand of diesel cars in India. While the annual growth in the diesel segment was 13 per cent in the last three years, it was 19-20 per cent in the first quarter (April-June) of the current fiscal. Maruti has currently an insignificant presence in diesel vehicle. It will manufacture new generation CRDI (common rail direct injection) engines in collaboration with Fiat-GM Opel and engines will be of 1200 cc. The plant with a capacity to produce one lakh diesel engines would be operational in 2006. At present, Peugeot of France, supplies diesel engines for Maruti's Zen and mid-sized Esteem models. This will further reduce the imported component in Maruti vehicles, making them more competitive in the Indian market. III. MARUTI PLANS FOR A NEW ENGINE AND TRANSMISSION PLANT The engine and the transmission plant will be owned by Suzuki Powertrain India Limited in which Suzuki Motor Corporation would hold 51 per cent stake and Maruti Udyog holding the balance. The ultimate total plant capacity would be three lakh diesel engines. However, the initial production would be 1 lakh diesel engines, 20,000 petrol engines and 1.4 lakh transmission

assemblies. Investment in this facility will be Rs.1,747.7 crore. The commercial production will start by the end of 2006. IV. INDIA AS EXPORT HUB FOR MARUTI Three years back as an experiment, based on the increasing design capabilities of suppliers in countries like India, McKinsey did an exercise to figure out just how much money could be saved if automobiles were to be made in overseas locations like India, Mexico and South Africa -- an automobile BPO, so to speak. The result was staggering: the industry stands to gain $ 150 billion annually in cost savings, and an additional $ 170 billion annually in new revenues once demand shoots up following the drop in prices, and the combination of which means a 25 per cent increase in existing revenue levels. According to the study, over 90 per cent of automobiles today are sold in the countries they are made in, so there's a lot of money to be made by shifting the production overseas. Till recently, just 100,000 cars produced in low-cost countries were exported to high-cost ones -- presumably this figure is going up now that Altos from Maruti, Santros from Hyundai, Indicas from Tata Motors, and Ikons from Ford, among others, are being regularly exported out of India. Yet, as McKinsey points out, since it just costs $ 500 and just three weeks (and both figures are falling) to ship out a car to anywhere in the world, why produce cars in high-wage islands? If a car was produced in India instead of in Japan, the study says, it will cost 22-23 per cent less, after factoring in higher import duties for components/steel, lower levels of automation, and transport costs. In August, 2003 Maruti crossed a milestone of exporting 300,000 vehicles since its first export in 1986. Europe is the largest destination of Maruti’s exports and coincidentally after the first commercial shipment of 480 units to Hungary in 1987, the 300,00 mark was crossed by the shipment of 571 units to the same country. The top ten destination of the cumulative exports have been Netherlands, Italy, Germany, Chile, U.K., Hungary, Nepal, Greece, France and Poland in that order. The Alto, which meets the Euro-3 norms, has been very popular in Europe where a landmark 200,000 vehicle were exported till March 2003. Even in the highly developed and competitive markets of Netherlands, UK, Germany, France and Italy Maruti vehicles have made a mark. Though the main market for the Maruti vehicles is Europe, where it is selling over 70% of its exported quantity, it is exporting in over 70 countries. Maruti has entered some unconventional markets like Angola, Benin, Djibouti, Ethiopia, Morocco, Uganda, Chile, Costa Rica and El Salvador. The Middle-East region has also opened up and is showing good potential for growth. Some markets in this region where Maruti is, are Saudi Arabia, Kuwait, Bahrain, Qatar and UAE. The markets outside of Europe that have large quantities, in the current year, are Algeria, Saudi Arabia, Srilanka and Bangladesh. Maruti exported more than 51,000 vehicles in 2003-04 which was 59% higher than last year. In the financial year 2003-04 Maruti exports contributed to more than 10% of total Maruti sales. V. MARUTI EMERGING AS R&D HUB FOR SUZUKI MOTOR CORPORATION

Japanese auto major Suzuki is all set to convert Maruti Udyog Ltd’s research and development (R&D) facility as its Asia hub by 2007 for the design and development of new compact cars, according to a top official of the firm. The country’s leading car manufacturer will make substantial investments to upgrade its research and development centre at Gurgaon in Haryana for executing design and development projects for Suzuki. This includes localisation, modernisation and greater use of composite technologies in upcoming models. The company will be hiring more software engineers and technocrats to handle Suzuki’s R&D projects. Investment would be more in terms of manpower than in infrastructure, which is already in place. Apart from working on innovative features, the R&D teams will focus on latest technologies using CAD-CAM tools to roll out new models that will meet the needs of MUL’s diverse customers in the future. The reasons as to why it can be good for R&D is that Ø Firstly the cost involved in R&D and infrastructure is low in India as compared to other countries. Also the technical skills are abundantly available; again at a cheaper cost. Ø Secondly, India is growing as an export hub along with the Indian market growing aggressively into becoming an attractive one for investors. Ø Thirdly, Suzuki’s investment in India, is also important as it has completely divested now as a result MUL will now become a 100% subsidiary of Suzuki in the coming year. KEY SUCCESS FACTORS (1)The Quality Advantage Maruti Suzuki owners experience fewer problems with their vehicles than any other car manufacturer in India (J.D. Power IQS Study 2004). The Alto was chosen No.1 in the premium compact car segment and the Esteem in the entry level mid - size car segment across 9 parameters. (2)A Buying Experience Like No Other Maruti Suzuki has a sales network of 307 state-of -the-art showrooms across 189 cities, with a workforce of over 6000 trained sales personnel to guide MUL customers in finding the right car. (3)Quality Service Across 1036 Cities In the J.D. Power CSI Study 2004, Maruti Suzuki scored the highest across all 7 parameters: least problems experienced with vehicle serviced, highest service quality, best in-service experience, best service delivery, best service advisor experience, most user-friendly service and best service initiation experience. 92% of Maruti Suzuki owners feel that work gets done right the first time during service. The J.D. Power CSI study 2004 also reveals that 97% of Maruti Suzuki owners would probably recommend the same make of vehicle, while 90% owners would probably repurchase the same make of vehicle. (4)One Stop Shop

At Maruti Suzuki, customers will find all car related needs met under one roof. Whether it is easy finance, insurance, fleet management services, exchange- Maruti Suzuki is set to provide a single-window solution for all car related needs. (5) The Low Cost Maintenance Advantage The acquisition cost is unfortunately not the only cost customers face when buying a car. Although a car may be affordable to buy, it may not necessarily be affordable to maintain, as some of its regularly used spare parts may be priced quite steeply. Not so in the case of a Maruti Suzuki. It is in the economy segment that the affordability of spares is most competitive, and it is here where Maruti Suzuki shines. (6)Lowest Cost of Ownership The highest satisfaction ratings with regard to cost of ownership among all models are all Maruti Suzuki vehicles: Zen, Wagon R, Esteem, Maruti 800, Alto and Omni. (7) Technological Advantage It has introduced the superior 16 * 4 Hypertech engines across the entire Maruti Suzuki range. This new technology harnesses the power of a brainy 16-bit computer to a fuel-efficient 4-valve engine to create optimum engine delivery. This means every Maruti Suzuki owner gets the ideal combination of power and performance from his car. FUTURE CHALLENGES Ø Maruti has always been identified as a traditional carmaker producing value-for-money cars and right now the biggest hurdle Maruti is facing is to shed this image. Maruti wants to change it for a more aggressive image. Maruti Baleno has failed due to one of the major reasons being that customers could not identify Maruti with a car as sophisticated as Maruti Baleno. Maruti is looking forward to bring about a perception change about the company and its cars. Maruti started the exercise with the new-look Zen, and Suzuki's decision to pick India as one of the first markets for this radically different-looking car gave this endeavor a new thrust. Maruti has also changed its logo at the front grill. It has replaced the traditional Maruti logo on grill ‘stylish ‘M’ with S’. The major thrust in the facelift endeavour is with the launch of 1.3 litre Swift. It’s a style statement from Maruti to Indian market. Ø The next threat Maruti faces is the growing competition in compact cars. Companies like Toyota, Ford, Honda and Fiat are planning to come out with small segment cars in near future.Ford is launching Focus and Fiesta, GM is launching Aveo in 2006, Chevrolet is launching Spark in 2006, Hyundai is launching its new compact car in 2006, Honda is launching Jazz in 2006, GM is has reduced prices of its Corsa, Fiat is coming up with Panda and new Fiat Palio, Skoda is launching Fabia. All this will pose a major threat to Maruti leadership in compact cars. Ø New emission norms like Bharat Stage 3 which has come into effect from April 2005 has increased car prices by Rs.20000 and Bharat Stage 4 which is coming into force in 2007 will contribute in increasing car prices further. This could be of concern to Maruti which is low cost provider of passenger cars.

Ø Rise in petrol prices and growing popularity of other substitute fuels like CNG will be another threat to Maruti. There is also a threat to Suzuki from R&D investment by Toyota and Honda in Hybrid cars. Hybrid cars could run on both petrol and gaseous fuels. Ø There is a threat to Maruti models ageing. Maruti models like Maruti 800 which is in market for the last twenty years and others like Zen and Esteem which have also entered the decline phase are the other threats. Maruti is planning phasing out Zen in 2007 and there were rumors of phasing out Maruti 800 also. This all makes Suzuki to replace these brands with new launches . As Swift and Wagon R are replacing the Zen market. Maruti will have to keep on making modifications in its present models or its models will face extinction.