Indian Automobile Industry : Maruti Case Study
MARUTI UDYOG LIMITED – Managing competition successfully
Maruti Udyog Limited (MUL) was established in Feb 1981 through an Act of Parliament, to meet the growing demand of a personal mode of transport caused by the lack of an efficient public transport system. It was established with the objectives of - modernizing the Indian automobile industry, producing fuel efficient vehicles to conserve scarce resources and producing indigenous utility cars for the growing needs of the Indian population. A license and a Joint Venture agreement were signed with the Suzuki Motor Company of Japan in Oct 1983, by which Suzuki acquired 26% of the equity and agreed to provide the latest technology as well as Japanese management practices. Suzuki was preferred for the joint venture because of its track record in manufacturing and selling small cars all over the world. There was an option in the agreement to raise Suzuki’s equity to 40%, which it exercised in 1987. Five years later, in 1992, Suzuki further increased its equity to 50% turning Maruti into a non-government ganization managed on the lines of Japanese management practices.
Maruti created history by going into production in a record 13 months. Maruti is the highest volume car manufacturer in Asia, outside Japan and Korea, having produced over 5 million vehicles by May 2005. Maruti is one of the most successful automobile joint ventures, and has made profits every year since inception till 2000-01. In 2000-01, although Maruti generated operating profits on an income of Rs 92.5 billion, high depreciation on new model launches resulted in a book loss.
COMPANY HISTORY AND BACKGROUND
The Evolution
Maruti’s history of evolution can be examined in four phases: two phases during pre-liberalization period (1983-86, 1986-1992) and two phases during post-liberalization period (1992-97, 1997-2002), followed by the full privatization of Maruti in June 2003 with the launch of an initial public offering (IPO).The first phase started
Maruti Udyog Limited (MUL) was established in Feb 1981 through an Act of Parliament, to meet the growing demand of a personal mode of transport caused by the lack of an efficient public transport system. It was established with the objectives of - modernizing the Indian automobile industry, producing fuel efficient vehicles to conserve scarce resources and producing indigenous utility cars for the growing needs of the Indian population. A license and a Joint Venture agreement were signed with the Suzuki Motor Company of Japan in Oct 1983, by which Suzuki acquired 26% of the equity and agreed to provide the latest technology as well as Japanese management practices. Suzuki was preferred for the joint venture because of its track record in manufacturing and selling small cars all over the world. There was an option in the agreement to raise Suzuki’s equity to 40%, which it exercised in 1987. Five years later, in 1992, Suzuki further increased its equity to 50% turning Maruti into a non-government ganization managed on the lines of Japanese management practices.
Maruti created history by going into production in a record 13 months. Maruti is the highest volume car manufacturer in Asia, outside Japan and Korea, having produced over 5 million vehicles by May 2005. Maruti is one of the most successful automobile joint ventures, and has made profits every year since inception till 2000-01. In 2000-01, although Maruti generated operating profits on an income of Rs 92.5 billion, high depreciation on new model launches resulted in a book loss.
COMPANY HISTORY AND BACKGROUND
The Evolution
Maruti’s history of evolution can be examined in four phases: two phases during pre-liberalization period (1983-86, 1986-1992) and two phases during post-liberalization period (1992-97, 1997-2002), followed by the full privatization of Maruti in June 2003 with the launch of an initial public offering (IPO).The first phase started