R C Bhargava has been the moving force behind the success of the Maruti story in India since 1981. He was the first CEO of the company and continues to head it even today. Not only has Bhargava rescued Maruti Suzuki from several pitfalls but has led it to an enviable rank. In fact so much so that Osamu Suzuki, chairman of Suzuki Motor Corporation, considers him his lucky charm and a man Friday!
Bhargava talks about the key issues that the company faces today in a freewheeling tête-à-tête with Sanjay Thapa Jeet.
Edited excerpts from an interview •
What is the position of Maruti Suzuki after four months of GST implementation?
I feel GST has been good for us. Only in the month of June we had halted despatch to dealers, but it was just a one time thing. We let the inventories deplete before restocking at a new price level. But sales have been good as GST has led to roll down of prices in many segments and it has triggered sales.
But the general industry is complaining that the GST has been a pain particularly in terms of filing returns and re-classification of components, etc.
We were well-prepared and have had no problems in the switchover from the previous system to current GST. Our staff were adequately trained hence we don’t have any problem. In fact, GST has boosted our sales as our input credit increased and domestic sales jumped by as much as 16 per cent post-GST in the April to October period. By October end our sales touched 9,61,820 in domestic (market) and 71,307 for exports.
But how has your upper-end luxury and SUV segment fared all this while particularly with the GST council later revising the GST taxes upwards on this segment?
Our high-end segment attracts 28 per cent plus 1 per cent under the new GST regime while the higher SUVs attract 28 per cent plus 15 per cent plus 2 per cent, but despite these our sales have been good. And we are happy about it.
With the higher sales post-July 1, is there any move to hike your present production capacities
at various locations in the country?
We will be adding production from Gujarat with the addition of two new plants by the end of 2021. The second plant will start functioning by the end of 2019 while the third will be operational by 2021. This will enable us to touch an additional production target of 2 million per annum when both become functional. I think that is a big capacity.
So that means big investments. What will be the tune of investments in the two envisaged plants?
Roughly it will work out to `2500 crore per plant. Hence the total investment would come to the tune of 5000 crore which will give us state of the art production units apart from those that we already have and will enable us to meet our target of two million.
So what happens to the funding of these projects? Is there any move to approach the capital markets through, say FPO?
No. We are a cash rich company and the entire investment will be funded by Suzuki so there is no need to approach the capital markets.
Ok. So that brings us to the future of Maruti. How do you view the road ahead? Is there any move to pitch the image of the company from an ‘entry-level vehicle manufacturer’ as was envisaged 36 years ago by Sanjay Gandhi or is there now a realisation to shift towards a higher-end brand now that you completed your mission to bring a car to the common man of India?
We will always remain entry level car manufacturers and we love it. There is no move to change the image of the company to other than that. But we are launching new SUVs and sedans. And we are also planning to soon bring a new SUV to India. Even as many new small car companies have come up, we face no challenge.
What about Nano? I recall interviewing Ratan Tata on the launch of Nano. He was confident that it would be a popular entry-level car and Indians would love it. But it hasn’t turned out to be so. Now after the Cyrus Mistry imbroglio, it is learnt that the Nano will be phased out.
Nano has not been liked by the Indian consumers. Perhaps there are some issues with it. But the Alto has been quite popular and our best car. We continue to be the leader in the (small car) segment even as we will continue to strengthen our other product ranges too. Customer loyalty and customer preference is highly valued by us and we deliver on the needs that customers demand from a good car.
The Ministry of Surface Transport has already targeted six million electric and hybrid vehicles under the National Electric Mobility Mission Plan, 2020 and making all trains powered by electricity by 2030. Mr Gadkari has even said that they will start from government vehicles with all government offices having vehicle charging points. So is there any move to work towards electric power vehicles?
Electric vehicles have a long way to go. They have not been successful in India. For instance, Mahindra’s REVA has been around for more than three decades now but how successful is it? Electric vehicles will require huge research and development both in the government and the private sector.
What is the main stumbling block for electric vehicles in India?
A big question mark remains on the re-charging of the battery of electricity-powered vehicles or swapping of batteries. For instance, how do you cater to the recharging of the vehicles — a typical recharging takes six hours. So either you wait for six hours or exchange the exhausted battery with a fully recharged one. But that brings about the question of components — batteries or standardisation of batteries, etc. So we have a long long way to go for vehicles running on electricity.