AUTOMOBILE INDUSTRY OVERVIEW

The Indian automobile industry, the seventh largest in the world, has demonstrated a phenomenal growth. The industry has grown significantly over the last ten years, during which industry volumes have increased by 3.2 times, from a level of 4.7 million numbers to 14.9 million numbers, according to Vishnu Mathur, Director General, Society of Indian

Automobile Manufacturers (SIAM).

The industry, by

virtue of its deep connects with several key

segments of the economy, occupies a prominent place in the countrys growth canvas. It exhibits a strong multiplier effect and has the ability to be the key driver of economic growth. A robust transportation system plays a key role in a country's rapid economic and industrial development, and the well-developed Indian automotive industry justifies this catalytic role by producing a wide variety of vehicles, which include passenger cars, light, medium and heavy commercial vehicles, multi-utility vehicles such as jeeps, scooters, motorcycles, mopeds, three wheelers, tractors etc.

Auto Industry in India Growth Drivers

The automobile sector in India has been experiencing significant growth in the last few years on the back of factors that include: Favorable demographic distribution with rising working population and middle class Urbanisation Rising affluence of the average consumer as per capita income rises According to McKinsey, the middle class in India will grow from 50 million to 550 million by 2025. With a tremendous growth in wealth as the economy grows, there will be significant increases in

spending on discretionary items and consumer durables Increasing disposable incomes in rural agri-sector Overall GDP growth, with a rise in industrial and agricultural output Introduction of ultra-low-cost cars Increasing maturity of Indian original equipment manufacturers (OEMs) Availability of a variety of vehicle models meeting diverse needs and preferences robust production Greater affordability of vehicles Easy finance schemes Favorable government policies

Indian Automobile market Key statistics

India's automobile industry, currently estimated to have a turnover of US$ 73 billion, accounts for 6 per cent of its GDP, and is expected to hit a turnover of US$ 145 billion by 2016.

The automobile industry currently contributes 22 per cent to the manufacturing GDP and 21 per cent of the total excise collection in the country, according to Mr Praful Patel, Minister, Heavy Industries and Public Enterprises. In 2010-11, the total turnover and export of the automotive Industry in India reached a new high of US$ 73 billion and US$ 11 billion respectively. The cumulative announced investments reached US$ 30

billion during this period. He also said that the forecasted size of the Indian Passenger Vehicle Segment is nearly 9 million units and that of 2 wheelers, close to 30 million units by 2020.

India achieved the position of the top growing passenger car market in the world during the January-June period in 2011, overtaking the US, which grew at 14.40 per cent, according to SIAM. In passenger vehicles, India was the fastest growing market at 18.20 per cent during the six month period.

India's automobile industry is expected to grow by 11 to 13 per cent in the fiscal year ending March 2012, according to Pawan Goenka, sold

President, SIAM. The industry body said that Indian automakers 143,370 cars in June 2011.

The four-wheel passenger vehicle market has grown impressively at the hands of the new middle class, and there is huge opportunity, as market penetration remains low.

Domestic market share for 2010-11 Indias automobile industry is growing fast, but two wheelers remain a dominant category. More than 78 percent of motor vehicles on the road are two-wheelers, their popularity driven by low price, high fuel mileage, and an ability to drive efficiently through dense traffic. The share of different (16.25), types of vehicles during 2010-11 was passenger three wheelers (3.39), vehicles and two

commercial vehicles (4.36),

wheelers (76.00).

Recent Investments/ Trends

The auto industry has made huge investments in the country. As per 2008-09, the total investment of auto industry in India was Rs 60,952 crore

(US$ 13.89 billion). Another Rs 78,000 crore (US$ 17.78 billion) of new investments have been announced by the auto industry out of which some have already been made and the rest will come up over the next 2-3 years. The industry, therefore, is keeping pace with the growing demand for vehicles in all segments.

The Karnataka government has cleared investment proposals amounting to more than Rs 8,662 crore (US$ 19.74 billion), which include the plans of Honda Motorcycle India plans for a manufacturing unit in the State. Mr.Murugesh Nirani, Karnataka Industries Minister, has said that Honda Motorcycles and Scooter India would be investing Rs 1,350 crore (US$ 307.7 million) in Narsapur Industrial area of Kolar district of the State.

Demand for two-wheelers from six of the eight domestic mobike manufacturers rose 16 per cent in June to more than 880,000 units,

compared to 761,000 units in June 2010.

Australia is looking at possibilities of building better relations between its world-class firms and rapidly growing Indian automotive industries with an objective to create new export opportunities.

Pune-based Force Motors has signed an agreement with Daimler AG, under which Daimler will supply technology for the development of a multi-purpose vehicle (MPV) by Force Motors

Swedish automobile manufacturer Volvo Cars Corp is looking at introducing corporate editions of its luxury sedans S60 and S80 to shore up volumes in the Indian automobile market.

French car maker PSA Peugeot Citroen has selected a site near Sriperumbudur, to the west of Chennai, in Tamil Nadu for setting up its car plant. The company is planning to invest Rs 4,000 crore (US$ 911.72 million) in an integrated automobile project.

Toyota has launched its first made-for-India small car, the Etios, Liva, in the intensely competitive hatchback segment. The car, priced between Rs 399,000 and 599,000 (US$9,094 and 13,653), will compete with Maruti Suzuki Swift, Hyundai i20, Volkswagen Polo and Ford Figo. Auto industry in India Government Initiatives

With the gradual liberalization of the automobile sector since 1991, the number of manufacturing units in India has grown progressively.

Currently, 100

per

cent

Foreign

Direct

Investment

(FDI)

is

permissible under automatic route in this sector including passenger car segment. The import of technology/technological upgradation on the

royalty payment of 5 per cent without any duration limit and lump sum payment of US$ 2 million is also allowed under automatic route in this sector.

The automobile industry is delicensed, and import of components is freely allowed.

With an objective of accelerating and sustaining

growth in the

automotive sector and to steer, co-ordinate and synergise the efforts of all stakeholders, the Automotive Mission Plan (AMP) 2006-2016 was

prepared. The plan aims at making India global automotive hub. The AMP 2006-2016 aims at doubling the contribution of automotive sector in GDP by taking the turnover to US$ 145 billion and providing additional

employment to 25 million people by 2016.

In the long term, the government has expressed plans to follow a two pronged strategy for spurring automotive Research &Development

(R&D). The first is aimed at addressing the existing infrastructure gap in the field domain of automotive testing and homologation through the

Departments

flagship

National

Automotive

Testing

and

R&D

Infrastructure Project(NATRiP), which is being implemented at a cost of Rs 2,288 crores (US$ 521.5 million), and is expected to be completed by the end of 2012. The second part of the strategy is aimed at leveraging the investments being made in NATRiP facilities for collaborative R&D with the industry, especially for the small and medium enterprises (SMEs) in the auto component space.

Further,

with the recent announcement

of the launch of

the

National Mission for Electric Mobility and the setting up of the National Council and Board for Electric Mobility, Mr Patel emphasized on the commitment of the government for early adoption of electric vehicles, including hybrid vehicles, and the manufacturing of these vehicles and their components.

The government is considering setting up two automotive manufacturing hubs spread over 10,000 acres each in central and

eastern India. The new hubs, aimed at consolidating India's position as an important destination for low-cost automotive production, will be in addition to the three existing zones Haryana, Maharashtra and Tamil Nadu.

Auto Industry in India Road Ahead The automotive industry is at the core of Indias manufacturing economy - India is all set to become one of the worlds most

attractive automotive markets for both manufacturers and consumers. The resulting benefits to society, such as economic growth, increased jobs, and stability for families employed by the automotive industry, are significant.

The long-term potential

for growth of the auto industry is very

favorable, on account of low vehicle penetration in the country. As income levels rise and easy finance is available, the industry will

continue to see a healthy growth rate. SIAM estimates that the growth of the auto industry in FY12 will be in the region of 12-15 per cent.

COMPANY PROFILE

Maruti Suzuki India Limited (MSIL), formerly known as Maruti Udyog Limited, a subsidiary of Suzuki Motor Corporation of Japan, is India's largest passenger car company, accounting for over 50 per cent of the domestic car market. Maruti Udyog Limited was incorporated in 1981 under the provisions of Indian Companies Act 1956 and the government of India selected Suzuki Motor Corporation as the joint venture partner for the company. In 1982 a JV was signed between Government of India and Suzuki Motor Corporation.

The company has two manufacturing facilities located at Gurgaon and Manesar, south of New Delhi, India. Both the facilities have a combined capability to produce over a 1.2 million vehicles annually. The company plans to expand its manufacturing capacity to 1.75 million by 2013.

The Manesar facility has been made to suit Suzuki Motor Corporation (SMC) and Maruti Suzuki India Limited's (MSIL) global

ambitions. At present this plant rolls out World Strategic Models: Swift, Astar & SX4 and DZire. The plant has several in-built systems and

mechanisms.

Suzuki Powertrain India Limited, the diesel engine plant at Manesar is SMC's & Maruti's first and perhaps the only plant designed to produce world class diesel engine and transmissions for cars. The plant is under a joint venture company, called Suzuki Powertrain India Limited (SPIL) in which SMC holds 70 per cent equity the rest is held by MSIL. This facility has an initial capacity to manufacture 100,000 diesel engines a year. This has been scaled up to 300,000 engines per annum by 2010. MSILs parent company, Suzuki Motor Corporation has been a global leader in mini and compact cars for three decades. Suzuki's technical superiority lies in its ability to pack power and performance into a compact, lightweight engine that is clean and fuel efficient. Product quality, safety and cost consciousness are embedded into their manufacturing process, which they have inherited from their parent company.

Maruti Suzuki exports entry-level models across the globe to over 100 countries and the focus has been to identify new markets. Some important markets include Latin America, Africa and South East Asia.

In 2010-11, the Company sold 1,271,005 vehicles, registering a growth of 24.8% over the previous year. This comprised 1,132,739 vehicles

in the domestic market and 138,266 vehicles in the international market. Cumulatively, the Company has produced 10 million vehicles. It rolled out its 10 millionth vehicle on 15th March, 2011, a signicant landmark for the Company and the automobile industry in India. The Companys total income (Net of Excise) for the year 2010-11 was Rs. 375,224 million, a growth of 24.6% over scal 2009-10. The Company has a strong balance sheet with reserves and surplus of Rs. 137,230 million and a debt equity ratio of 0.02 as on 31st March, 2011.

NATURE OF THE COMPANY OWNERSHIP

Maruti Suzuki is a public limited company listed on the Bombay Stock Exchange Limited and National Stock Exchange of India Limited. SMC is the majority shareholder with 54.21% equity stake in the Company. For the shareholding pattern of the Company, refer to page 50 of the Corporate Governance section of the Annual Report.

ORGANISATIONAL STRUCTURE

Maruti Suzuki has a multi-tier management structure, comprising a Board of Directors at the top, followed by ve business vertical heads

reporting to the Managing Director. The business verticals of the Company are Marketing & Sales, Engineering, Production, Administration and Supply Chain. For more information on the organisational structure and the leadership team of Maruti Suzuki, refer to page 38 of the Corporate Governance section of the report.

ORGANISATIONAL STRUCTURE

MANUFACTURING FACILITIES

Maruti Suzuki has two manufacturing facilities in Haryana, one each at Gurgaon and Manesar, with a combined manufacturing capability of over 1.25 million vehicles per annum, which is much beyond the installed capacity of 1 million vehicles.

Gurgaon Plant

The Gurgaon facility contains three fully integrated plants with a combined installed manufacturing capacity of over 700,000 vehicles per annum. it also has a state-of-the-art K-series engine casting plant with a capacity of 7.80 lakh engines per annum.

Manesar Plant

The Manesar facility was started in February, 2007 and has one plant with a capacity of 300,000 vehicles per annum. Two more plants are presently under construction at Manesar.

R & D Capabilities

The Company is gradually enhancing its R&D capabilities. It has over 1,000 R&D engineers. The R&D team is working closely with SMC engineers on new product design and development. It has also initiated work on setting up a test course for R&D purposes at Rohtak, Haryana.

SUPPLIER BASE

The Company has worked through the year with its suppliers to develop new products, refresh existing ones and achieve higher localisation levels to reduce costs. As on 31st March, 2011, the Company had a

supplier base of 260, including 19 joint venture companies where the Company holds a strategic equity stake.

DOMESTIC SALES AND SERVICE NETWORK

Over the years, the Company has expanded its sales and service network to cover the length and breadth of the country. Amongst car manufacturers in India, Maruti Suzuki has the largest sales and service network. As on 31st March 2011, it had 933 sales outlets in 668 cities and 2,946 service workshops in 1,395 cities. The service network of the

Company includes dealer workshops, Maruti Authorised Service Stations (MASSs), Maruti Service Masters (MSMs) and Maruti Service Zones (MSZs).

Map is indicative, not to scale Some states have more than one regional office and area office

Besides selling and servicing vehicles, the Company provides its customers services like automobile nance, genuine spare parts and accessories, extended warranty and certied pre-owned cars. The Company had 353 True Value pre-owned car outlets in 208 cities as on 31st March, 2011.

EXPORT SALES AND MARKETS Maruti Suzukis rst export assignment was a batch of 500 cars to Hungary in September, 1987. Since then, the export portfolio of the Company has been consistently expanding. In the reporting year, the Company exported to 78 countries in Europe, Asia, Latin America, Africa and Oceania.

Besides selling and servicing vehicles, the Company provides its customers services like automobile nance, genuine spare parts and accessories, extended warranty and certied pre-owned cars. The Company had 353 True Value pre-owned car outlets in 208 cities as on 31st March, 2011.

Product range includes

It offers cars from entry level

Maruti 800

&

Alto

to stylish

hatchback Ritz, A star, Swift, Wagon R, Estillo and sedans DZire, SX4 and Sports Utility vehicle Grand Vitara.

Maruti 800 Alto Alto K10 Omni Gypsy Zen Estilo Wagon R Versa A-star Ritz

SX4 Swift Dzire Eeco Grand Vitara

MILESTONE OF THE COMPANY :

Year 1981 1982 1983 1984 1985 1986 1987 1990 1992 1993 1994 1996

Achievement Maruti Udyog Ltd. incorporated under provisions of the Indian Companies Act, 1956 Signed License and JV agreement signed with Suzuki Motor Corporation Launched Maruti 800 Launched Omni Launched Gypsy Produced 100,000 vehicles Exported rst lot of 500 cars to Hungary Launched Indias rst sedan, Maruti 1000 SMC increased its stake in Maruti Udyog Limited to 50% Launched Zen Produced 1 million cars Launched Esteem Launched 24-hour Maruti-On-Road Service (MOS)

1999 2000

Produced 2 million cars Launched Baleno Launched Wagon R Launched IDTR jointly with the Delhi government to promote safe driving (A CSR initiative) Launched Alto Launched Versa Launched Maruti True Value (pre-owned car business) Inaugurated Childrens Park in Delhi (A CSR Initiative) MC increased its stake in Maruti to 54.2% Launched Grand Vitara Produced 4 million cars Listed on Bombay Stock Exchange and National Stock Exchange Launched Swift Maruti launched Dil Se a special programme for Indians living abroad, to facilitate them to gift Maruti cars on line to friends and relatives back at home. MOU signed with Government of Haryana to set up IDTR Inaugurated 2nd IDTR at Delhi (A CSR initiative) Launched Zen Estilo Produced 6 million cars Launched Swift Diesel Inaugurated the fourth assembly line and diesel engine plant at Mansear Launched rural scheme Ghar Ghar Mein Maruti; Mera Sapna Maruti launched Launched SX4 First Citizen, Dr. A.P.J. Abdul Kalam visits Marutis facilities Maruti Udyog Limited renamed Maruti Suzuki India Limited MOU signed with Government of Gujarat to setup Driving and Technical Training Institute for tribal youth in Gujarat (A CSR initiative) Initiated community development programmes in 4 villages in Manesar (A CSR initiative)

2001 2002 2003

2005 2006

2007

2008

Launched Swift DZire Inaugurated K10B engine plant at Gurgaon Launched A-star Completed 25 years of operations in India Launched National Road Safety Mission (A CSR initiative)

2009

First shipment of A-stars dispatched from Mudra port for overseas markets Signed MoU with Government of Uttarakhand to set up IDTR (A CSR initiative) Laid the foundation of two IDTRs in Haryana (A CSR initiative) Launched Ritz Produced 8 millionth car Haryana Government allotted 700 acres for R&D complex at Rohta Launched Estilo Launched IDTRs at Uttarrakhand and Gujarat ( A CSR initiative) Launched Eeco Achieved landmark of producing one million cars in one year Launched Alto K10 CNG i-GPI Green range launched - SX4, Estilo, WagonR, Eeco, Alto

2010

2011

Launched Kizashi Launched SX4 Diesel Produced 10 million cars