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Jagdish Khattar, MD, Maruti Udyog, says that he is aiming for double-digit growth in 2006, which has only been at 4-5 per cent up till now. Khattar also says that the current price cuts are going to have a tremendous influence in the next couple of years, and will provide a step-up in growth.
He adds that he foresees other players entering the small car segment within the next couple of years.
Given your experience in this market for several years, what is the kind of elasticity and volumes that you expect to see, after these price cuts?
We have seen that whenever excise cuts take place, there is a step-up in growth, provided all other things remain same, and I am sure we will see it this time around too.
However, let me put it in proper perspective. This decision of price cuts is going to have a tremendous influence in the next couple of years, since I foresee other manufacturers to come into this segment. Players who have been sitting on the sidelines are expected to come here. Thus I feel, we will become a real strong base for the small car market.
Staying with the price cuts, what do you expect in the Swift and the diesel version when it gets launched later this year? Also, would you tweak any of your other models, to bring them under the ambit of small cars to effect cuts in them as well?
As far as the other models are concerned, they have to be considered with other models of other manufacturers. So I do not feel much can be done in this area as of now.
Second, the Swift diesel version, which would be 1.3 litres, would also come under the ambit of the new excise regime.
How much do you see the revenue increasing, after the price cuts, because the small car segment contributes more than 60 per cent of your revenue?
Well this year, growth has only been at 4-5 per cent in the market, so I feel we should try and aim for a double-digit growth.
Is there any more room for further price cuts, keeping the competitors in mind?
I feel the current price cuts, ranging from Rs12,000-Rs25,000 are very substantial by themselves, for all manufacturers.
We have also seen that even the consumer promotions, which we had given on Budget-eve in February, when the customers actually postpone their buying, were less than the current price cuts.
Did the Budget have any margin implications for Maruti since we have seen duty cuts in non-ferrous metals like aluminium, anything which might shore-up your margins?
These cuts will have no immediate impact, since we have already entered into annual contracts with our suppliers, which will end this year. Thus, we will be taking these reductions into consideration only by next year.
Purely in terms of size, do you see your capacity increasing? Also do you expect a shift of production capacity into India for other players as well?
We are already in the process of acquiring a new 100,000-car plant, which is currently under construction, and should be operational by end of the year. Regarding the entry of other manufacturers, as I mentioned earlier, I foresee more players entering the market in the next year or two.
Do you have any specifics in mind?
Most of them are already here, though they are not in this segment at the moment. There are some of them, which have similar models overseas and most of us know who those players are.
Do you think GM, Toyota and Ford would try to position their models here?
In the current regime, if the small-car segment is going to be a major one where all future growth is, then all major manufacturers would like to play a significant role in the domestic market.
I foresee that as the volumes increase and prices get more competitive, they would also start sourcing from here. Take the example of Hyundai, which is going to cross a capacity of 100,000 soon, and I give them full marks for that.