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Is over dependence on Suzuki costing Maruti??

Created by : Mridula Maity, Product Development Manager, Rugel  | 07 27 2010 05:34:57 +0000
Industry : AutomobileFunctional Area : Business Policy(Strategy & Execution)
Keywords : maruti suzuki maruti cars maruti motors suzuki corp maruti's overdependence on suzuki suzuki motors
Activity:  243 views;  last activity : 08 05 2010 14:51:26 +0000

The over-dependence on its Japanese parent for launching new models in quick succession is proving costly for Maruti Suzuki. In the June 2010 quarter, the country’s largest passenger carmaker reported a 20% fall in net profit to `465 crore despite a 27% YoY jump in net sales. This is largely due to a sharp rise in the payment of royalty and technical fees (RTF) to its parent, Suzuki Motor, for use of its technology and brand.


http://im.in.com/connect/images/profile/b_profile3/Maruti_Suzuki_300.jpg

This resulted in a sharp contraction in operating margin to 7.6% of net sales, one of the lowest in the last five quarters. Operating margin fell despite favourable raw material environment. But in the case of Tata motors or Mahindra & Mahindra, they do not have to pay the RTF and other things. Hence are having a higher share of success this time around..

So, what do you think people, is overdependence on Suzuki costing Maruti??

  
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I think yes, it is costing them dearly as we can see the percentage of fall they had this quarter, and where as Tata and others who have nothing such as royalty and technology to go for...here in future if the prices of raw materials increase or if there is an increase in the excise duty, then it will be all the more difficult for Maruti to post growth, forget growth with stiff competition from new entrants like wolkswagen, ford and many others in the small car segment with polo, figo and Nissan Micra...the days ahead are very tough for them.
By Mridula Maity, Product Development Manager, Rugel  07 27 2010 05:34:57 +0000
 
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Yes, You are correct Mridula.

IT already costs them a lot in past & in future also.
By SHRIKANT MANOHAR DANKE, Project Manager, Phadnis Infrastructur Ltd  | 08 05 2010 14:51:26 +0000
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Maruti Suzuki amount 6,791 cr royalty to Suzuki that is 8.3 of its EBITDA 671.7% more than dividend paid in fy09 Maruti raised royalty payments to parent Suzuki Motor Corp by 150bps to 5.1% of sales this quarter. Means we are nurturing a foreign investment at our costs(we pay its original, cost of fuel to run its vehical and taxes for that above it).This has to be considered by maruti management that the money of Indians are used for nurturing Japanese company-not japanese govt. And this increase in royalty was done after corresponding increase in EBITDA and same is the case with sterlite and Herohonda who pays 22.9 and 13.7 of EBITDA resp
By ZOHAR BATTERYWALA, Relationship Manager, TAJ INVESTMENT  | 07 28 2010 05:48:46 +0000
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........Costing? Already costs a lot. Where is the logo of Maruti is seen on any Maruti Suzuki vehicle?
By Anand Sharma, Monitoring the research funded by DIT, Department of Information Technology  | 07 27 2010 06:20:53 +0000
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What all should see is jump in net sales, which is very encouraging to Maruti. Suzuki is parent company and every product it is dependent on Suzuki more. Product & technology wise there is no  Maruti without Suzuki. Financial wise There is No Suzuki without Maruti.

  Both Maruthi, suzuki and share holder are know what is best for them. If compare cost of developing new engine, model the RTF it is merge.

 

 
By Ashoka B kalgude, Executive, Biocon India  | 07 27 2010 13:48:23 +0000
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I don't think so that it will have an impact....even if so they have an impact like that,, they can go for a buyout of sorts which will help them in that regard...so that they have not to pay any such royalty...i believe Maruti is capable of doing that...
By Taniya Laskar, Project Architect, Leading IT solutions  | 07 27 2010 13:43:02 +0000
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