With steel sourcing contracts up for renewal this month, Maruti Suzuki is looking to reduce costs this fiscal by at least 3-3.5 per cent.
Mr Subir Moitra, Managing Executive Officer of Supply Chain, told Business Line that the company is trying to increase domestic steel supply, 50 per cent of which is currently imported.
“Imported steel is more expensive by 10-15 per cent. Steelmakers in India are now trying to make much of the specific grades that we need, such as high strength steel, so we will source more locally,” he said.
Steel sourcing contracts are now quarterly, a change from the bi-annual practice a few years back due to volatility in global prices.
In India, Tata Steel and Essar are its main suppliers, while Nippon-Sumitomo, JFE and Posco supply from overseas. With margins under pressure in 2011-12 because of adverse forex movement and rising commodity costs, cost reduction will be a primary target driving efficiencies across the auto industry.
“We see some stability on falling exchange rates and hope to improve margins this year through economies of scale, better cost realisation on models, higher localisation and yield improvements,” said Mr Shinzo Nakanishi, Maruti's MD & CEO.