Maruti Suzukis Perspective on Automotive Steel

S.D. Chhabra Astt. General Manager (Supply Chain) Maruti Suzuki India Limited July 08, 2009

Contents
Domestic Automotive Space Update on Maruti Suzuki India Ltd Maruti Suzukis Steel Sourcing Expectations from Indian Steel Mills based on QCDDM Experience

Domestic Automotive Space - Automotive Investments

New Hub : Uttaranchal

NORTH

WEST

EAST MAN

SOUTH

Plans to become the Global Small Car Hub by 2010, with more and more joining the bandwagon

Indian Automotive Industry Today

3rd largest small car manufacturer in the World 2nd Largest Two Wheeler manufacturer in the World Worlds largest Motorcycle manufacturer is in India 2nd Largest Tractor manufacturer in the World 8th Largest Commercial vehicle manufacturer in the World. 9th Largest Car manufacturer in the World

Indias share in world car production in year 2005 was 1.8% (3.20% in 2007)

Automotive Mission Plan 2016

Document prepared by Government of India in consultation with ACMA & SIAM
Automotive Industry viewed as Locomotive for Growth Turnover $ 35 Billion to $145 billion Automotive Plan 2016 Export Employment $ 4.1 Billion to $35 billion + 25 million

Will contribute 10% of the Countrys GDP and 30~35% of the Industry GDP

Auto Growth Drivers- Tariff Reduction

50.00

Net Custom Duty

50 40 30 20 10 0
%

Excise Duty on Cars

40.00

30.00

20.00

10.00

0.00

20 01

20 02

20 03

20 04

20 05

20 06

20 07

20 08

M ar -

M ar -

M ar -

M ar -

M ar -

M ar -

06 M ar '0 7 M ar '0 8 M ar '0 9

Auto-Components

Steel

Big Car

Small Car

Supportive Trend of Duty Structure

20 09

05

01

02

03

04

Indian Automotive Industry : Projections

35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 -

14.35 % CAGR
04-05 8,467,853 1,209,876 353,703 374,445 6,529,829 05-06 1,309,300 391,083 434,423 7,608,697 06-07 1,545,223 519,982 556,126 8,466,666 07-08 1,777,583 549,006 500,660 8,026,681 08-09 1,838,697 417,126 501,030 14-15 3,000,000 1,416,079 1,514,713

Industry Total Passenger Vehicles Commercial Vehicles Three Wheelers Two Wheelers

9,743,503 11,087,997 10,853,930 11,175,479 32,334,315

8,418,626 26,403,523

Source: SIAM Data, ACMA Projections

Indian Auto-Component Industry: Projections

PROJECTED at 15% CAGR
40.00 35.00 30.00

40.00

US$ Bn

25.00 20.00 15.00 10.00 5.00 0.00 02-03 03-04 04-05 05-06 06-07

18.00 12.00 5.43 6.73 8.70 15.00

19.00

07-08

08-09

16-17

Production

Source: ACMA India

Update on Maruti Suzuki India Ltd.

Maruti Suzuki India Ltd. - Products

1. 2.

12 Basic models. 5 Engine Types : 796cc, 1061cc, 1067cc, 1197cc 1298cc, 1590cc - all gasoline, 1248 cc Diesel. Latest addition to portfolio KB10 (1067cc), KB12 (1197cc) engines

Production Facilities

Currently 4 plants spread over 3.2 million square meters,

Plant Plant-1 Plant-2 Plant-3 Plant-4 (New) Total

producing one car every 26 seconds Commissioned Capacity 1983 250,000 1994 140,000 1999 210,000 2006 250,000 850,000

In addition, a New Diesel Engine Plant with a current capacity of 200,000 units started in 2006 (planned 300,000 capacity by year 2010)

Sales Trend
Total Production (in 000)
1200 1000 800
Nos ('000)

> 1000 764 792 667 540 572

600 400 200 22 0 106 158

GR CA

.0% > 15

473

333

360

1984- 1988- 1993- 1998- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 201085 89 94 99 03 04 05 06 07 08 09 11 Year (Apr-Mar)

Market Share - Passenger Cars

60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% 2006-07 2007-08 Maruti Others 2008-09
54.60% 45.40% 54.70% 45.30% 55.00% 45.00%

Maruti Suzukis Steel Sourcing

Maruti Suzukis Auto Grade Steel Sheet Consumption Pattern

600

>525

Quantity, '000 MT

500

400

345 243
132

362

300

260
195 140 210

226
200 120 100 106 0
FY2004-05

111
FY2005-06

120

150

152

FY2006-07

FY2007-08

FY2008-09

FY2010-11#

In-house

Vendor's

Values are indicative # Projections for FY10-11

Maruti Suzukis Sheet Metal Sourcing Pattern

120 100

10 50

80

60

40

90 50

20

Vendor

In-house

Local

Imports

Values are indicative for 2008-09

As against this the component level localization percentage is above 94% for most MSIL Models

Expectations from Indian Steel Mills Based on QCDDM Experience

Expectations from Indian Steel Mills Quality

Defect free supplies Consistency in Surface Quality for skin panel applications Higher Strike rates at Steel Makers for manufacturing of Auto grade steel, especially Skin Panels Close Dimensional tolerances to be maintained Packaging Improvements

Expectations from Indian Steel Mills Cost

Automotive quality local steel should be available at competitive prices as available to Japanese OEMs in Japan Productivity Improvement to reduce cost Avoiding logistics related losses Supplies in lower tolerance zone of nominal thickness

Expectations from Indian Steel Mills Delivery

Continuous availability with long term commitment Short ordering lead time Low inventories at our plant 100% conformity to delivery schedules Coming closer to our plant through Service Centres/ Warehouses Flexibility in systems to manage abrupt, large fluctuations in Market requirements

Expectations from Indian Steel Mills - Demand Fluctuation in 08-09

30.00% 20.00% 10.00% 2% 0.00% Apr -10.00% -20.00% -30.00% -32%
Production : variation wrt yearly average vehicle production per day

21% 10% 4% May -4% Jun Jul -3% -13% Aug Sep -3% Oct Nov -8% Dec 4%

23%

Jan

Feb

Mar

-40.00%

Production systems under pressure.. suppliers need to support

Expectations from Indian Steel Mills Development

High Tensile Steel Galvannealed Steel Fuel Tank Material Development Lead times

High Tensile Strength Material

HT Usage in Domestic Models HT Usage in EU Export Models

Normal Steel

HT <=440 Mpa

HT > 440 Mpa

Normal Steel

HT <=440 Mpa

HT > 440 Mpa

Normal Steel 96.5% HT <= 440 MPa 3.5% HT > 440 MPa 0%

Normal Steel 55% - 65% HT <= 440 MPa 25% - 30% HT > 440 MPa 10% - 15%

Government Regulations
The following safety regulations are in progress and are yet to be implemented
Subject Off Set Impact Lateral Impact Rear Impact Standard AIS:098 AIS:099 AIS:100 ~ Oct 2012 Tentative Implementation Date

With the implementation of above safety regulations, the focus will shift more towards the usage of Ultra High Strength steels.

Expectations from Indian Steel Mills Development

High Tensile Steel Galvannealed Steel Fuel Tank Material Development Lead times

Galvannealed Steel
Good Corrosion Resistance properties GA usage in India will go up as India is becoming a Export hub for major auto manufacturers GA material is used in Export vehicles to meet the stringent corrosion resistance requirements of Europe Currently all GA requirement is being imported, as the same has not been approved from local mills

Expectations from Indian Steel Mills Development

High Tensile Steel Galvannealed Steel Fuel Tank Material Development Lead times

Fuel Tank Material

In the early 1970s all fuel tanks were of Steel Now both Steel & plastic fuel tanks are in use MSIL is Currently using Terne coated & Eco-coat steel sheets used for Fuel Tanks of all models The same is completely being imported to meet our requirement as the same is not vailable with local mills

Expectations from Indian Steel Mills Development

High Tensile Steel Galvannealed Steel Fuel Tank Material Development Lead times

Expectations from Indian Steel Mills Management

Investment in Latest Technology Investment in R&D Integrated Solutions Automotive Application Engineering Capabilities Capacity Planning

Thanks to all the Stake holders present here for their contribution in our growth

However we continue to expect .. More and Higherto be able to deliver more value to our customers

THANK YOU ALL