Maruti’s royalty payout to parent Suzuki has increased sharply on account of new model launches. The market leader’s first half (April-September) royalty payout to Suzuki jumped to Rs 154 crore, up 25% from Rs 123 crore in the first half of last financial year.
Company sources say this increase is primarily on account of “higher sales of newer models Alto, WagonR and Swift.” With the new Zen Estilo rolled out in the third quarter of this fiscal and Swift’s diesel version expected in Q4, the royalty payout should increase some more, say analysts.
The increase in royalty payout was primarily responsible for the sharp rise in other expenditure in the second quarter of this fiscal compared to last year, say analysts. Other expenditure moved up from Rs 264.34 crore last Q2 to Rs 315.23 crore this year. The half yearly tally rose from Rs 462.89 crore last year to Rs 561.99 crore this time round.Maruti’s royalty payment, which is based on net sales, consists of two parts.
The first part is the lump sum fee which varies from model to model and the other part is an annual fee for which the government of India has fixed some norms. According to MD Jagdish Khattar the lump sum fees paid by Maruti to Suzuki “is far less and quite reasonable when compared with other MNC subsidiaries.”
Maruti’s aggressive new product plans going through to 2010 is working around the issue of increasing royalty by using common platforms. Maruti will ultimately have three or four platforms in India, including future launches, to keep development cost and time down. According to Mr Khattar, the company has already saved around 20-25% in product cost in the last five years because of its strategy of commonalisation of platforms across models and countries.
The commonalisation of platforms strategy involves launching multiple models on the same platform. For example the Zen Estilo, WagonR and Alto share a common platform while multiple markets like Japan, China, Hungary and India share the Swift platform. This helps bring down product cost as the amortisation is done over more models and bigger volumes.
Company sources say this increase is primarily on account of “higher sales of newer models Alto, WagonR and Swift.” With the new Zen Estilo rolled out in the third quarter of this fiscal and Swift’s diesel version expected in Q4, the royalty payout should increase some more, say analysts.
The increase in royalty payout was primarily responsible for the sharp rise in other expenditure in the second quarter of this fiscal compared to last year, say analysts. Other expenditure moved up from Rs 264.34 crore last Q2 to Rs 315.23 crore this year. The half yearly tally rose from Rs 462.89 crore last year to Rs 561.99 crore this time round.Maruti’s royalty payment, which is based on net sales, consists of two parts.
The first part is the lump sum fee which varies from model to model and the other part is an annual fee for which the government of India has fixed some norms. According to MD Jagdish Khattar the lump sum fees paid by Maruti to Suzuki “is far less and quite reasonable when compared with other MNC subsidiaries.”
Maruti’s aggressive new product plans going through to 2010 is working around the issue of increasing royalty by using common platforms. Maruti will ultimately have three or four platforms in India, including future launches, to keep development cost and time down. According to Mr Khattar, the company has already saved around 20-25% in product cost in the last five years because of its strategy of commonalisation of platforms across models and countries.
The commonalisation of platforms strategy involves launching multiple models on the same platform. For example the Zen Estilo, WagonR and Alto share a common platform while multiple markets like Japan, China, Hungary and India share the Swift platform. This helps bring down product cost as the amortisation is done over more models and bigger volumes.
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