Maruti Suzuki said on Monday that it expects costs incurred on research and development (R&D) to go up in 2011-12 as the company develops new models to maintain its nearly 50 per cent share of the fast growing car market.
“The R&D expense is 1.1 per cent of net sales currently, which will go up to 1.3-1.4 per cent this year. Depending on the R&D expenditure benefit extended by the Government, the tax rate should be lower … at 26-27 per cent going forward,” said Mr Ajay Seth, CFO, while responding to questions at the post results investors' call.
Capex
With five lakh unit additional annual capacity being added at Manesar and an R&D expansion in the pipeline, capital expenditure for the company is expected to touch Rs 4,000 crore this year and then decline after that. In 2010-11, capex stood at Rs 2,200 crore.
The company also expects raw material costs, like of natural rubber and copper, to all go up. The main raw material, steel, for which contracts are still under negotiations, may see a 10-15 per cent rise in cost.
“There is short-term uncertainty in the Indian market, but we are confident for the medium to long-term. Through increased localisation and efficiency, we will aim to increase our profit margins from current levels,” said Mr Shinzo Nakanishi, CEO and MD, Maruti Suzuki.