XA Alpha SUV joint development might bring royalty down for Maruti
Maruti Suzuki India Limited (MSIL) is set for a big game in Sports and Multi Utility Vehicle (SUV & MUV) segments via new launches planned in coming months. Stating with these products (expected to be XA Alpha SUV and S Cross MUV), MSIL wishes to pay less royalty to parent company in Japan.
MSIL pays royalty to Suzuki Motor Corporation (SMC) for using their design & technology among others. In second quarter of 2014 ended June 30, Maruti paid Rs. 689 crores as royalty, which was 6.2 % of net sales. As Maruti engineers enhance their involvement in joint development of future products, MSIL is hoping to have to pay less hereafter to Suzuki.
Ajay Seth, Chief Financial Officer of Maruti Suzuki India Limited told analysts that in any situation they have joint development of any product, utilising engineers in both India and Japan. Mr. Seth added that there will be an equal division when calculating royalty based on efforts and technology put in from either side. He also added that core technologies like powertrain and basic platform would continue to be received from Japan but royalty paid to SMC would be reduced appropriately.
Mr. Seth did not reveal schedule of upcoming product launches but he mentioned that MSIL is entering SUV and MUV segments with full bandwidth. This points to products like Maruti S Cross, Maruti Ciaz and Maruti XA Alpha. Of the three, it is the XA Alpha which is the first product in which Maruti is jointly developing with SMC.
Maruti S-Cross compact crossover is expected to launch in September / October 2014, while Ciaz sedan replacing Maruti SX4 will launch in September. XA Alpha SUV concept showcased at 2012 Delhi Auto Expo is believed to enter production in first half of 2015.
Above launches are targeted against respective segment toppers which are doing phenomenally in the market currently. Ciaz will compete with Honda City, S-Cross will stand up against Renault Duster and XA Alpha will rival Ford EcoSport. Maruti has not seen appreciable success in premium and sports utility vehicle segment thus far. This time, it appears that MSIL has learned well form past and has potential to upset current segment leaders.
The company has made an investment of Rs 2,000 crores for an R&D centre at Rohtak, Haryana, which includes a test track. Operations have commenced partially there until centre becomes fully operable by November 2014.
Via – Economic Times