Maruti Suzuki has asked its 200-odd vendors to cut their component costs by three per cent across the board in this financial year.
Such a cut could lead to a saving of around Rs 700 crore (Rs 7 billion) for the country's largest car company in a year.
With net sales of around Rs 29,000 crore (Rs 290 billion), nearly 77 per cent of the components are bought from its vendors. The saving works out to Rs 7,000 for each car at last year's production level of a million cars annually.
Speaking a day after attending the global vendor and dealer conference of Suzuki in Macau and Hong Kong, R C Bhargava, chairman, said: "Our target to the vendors is to reduce costs by three per cent. However, the savings from such a cost reduction gets negated if raw material costs go on rising, as well as due to fluctuations in the foreign exchange regime. But, if we don't go for a reduction and raw material prices go up and the foreign exchange regime is not in our favour, the total impact would mean the cost of the car would go up and so could prices."
Bhargava also revealed that Suzuki was working on more fuel-efficient engines, which would offer more than the current 20 km to a litre and carbon dioxide emissions below 100 kg to a km.
Currently, Suzuki engines offer less than 20 km a litre, while CO2 levels are well over 100 kg, the best being 103 kg a km.
"Fuel efficiency has always been the USP (unique selling proposition) of Suzuki and the R&D (research and development department) in the company will be working on engines which will offer mileage beyond 20 km. With global emission norms getting tougher, you have to make engines with more fuel efficiency, as well as lower CO2," added Bhargava.
He said Suzuki would, in due course, launch its big car, Kizashi, expected to take on the Honda Accord and Toyota Camry, with a 2.4-litre engine. The car was launched in the US and Japan only last year.
Bhargava also ruled out any plan to launch a new 800cc car to take on Hyundai's proposed small car, which is expected to be in the same range or as a replacement to the Maruti 800cc.
Says Bhargava "We have decided that we will not come with a Nano segment car or with any new model in 800cc.
Our base-level entry model will be the 1,000cc. We believe consumers want a value for money car but also want performance and the combination can only be given from the 1,000cc range. Also, smaller the engine, the more difficult it is to meet growing stricter emission norms."
Ruling out speculation on Maruti using Volkswagen's (the company has bought a stake in Suzuki) plant in Chakan, near Pune, to manufacture its cars on a contract basis to meet its capacity constraint, Bharagava said: "There is no such thing at all. The India plan has not been concretised yet at all."
