Indian market leader Maruti Suzuki's product localisation rate may be restricted to 95%, according to a senior company official. "Some components which are highly sophisticated need to be sourced from outside since there is no production base here," said R S Kalsi, the automaker's executive director for sales and marketing, as quoted by the Economic Times. The executive said it was not possible to establish a local vendor base for such components as this kind of move would require a captive market.
Significance: Having started local manufacturing operations more than three decades ago, Maruti Suzuki has an extensive local supplier base. Although the automaker still lacks indigenous developed technology, it has set up joint-ventures with Japanese players to localise production over the years. Excellent product localisation is a major factor behind Maruti's cost advantage over its peers. In recent years, the automaker has started expanding in rural areas – a strategy that has yielded dividends as urban demand has suffered. Demand in rural India is likely to take a hit this year as unseasonal rains in February and March affected crop production. Meanwhile, the India Meteorological Department has forecast the upcoming monsoon to be 9% below normal levels.
