Ashok Leyland Managing Director Vinod Dasari last week took potshots at Maruti Suzuki.
Speaking at an Ashok Leyland event in Chennai, Dasari called for a bigger push to homegrown designing of vehicles to create better quality jobs. In the same breath, he sought a cap on royalty fees paid by Indian auto makers to their parent companies.
“We will never have Make in India successful unless we have design in India,” Dasari said. “I think we should put caps on royalties for all these companies who are only taking technologies from abroad and only doing contract manufacturing in India. Ask them to design in India”, said Dasari.
Car market leader Maruti Suzuki is one of the companies which has seen a spurt in payment of royalties to its parent Suzuki Motor Corporation, Japan. In 2016-17 royalty fees paid by the company jumped by 19 percent to Rs 3,848 crore as against Rs 3,244 crore paid in 2015-16. In 2011-12 it stood at Rs 1,803 crore.
“Hire in India, design in India and then you make in India. Because for every manufacturing job you create there are 2 more jobs created outside. But for every design job you create there 30 other jobs created outside. Maruti (Suzuki) has been in this country for decades. How many design companies are there in India (sic)? Why do we still, after making cars for decades in India, still importing design? Why are we still paying royalties to somebody else? Make in India is very important but has to be supported with Design in India”, added Dasari.
Presently 5 percent of Maruti Suzuki’s revenues goes towards payment of royalty fees. The Delhi-based company has taken steps to reduce the royalty impact on its margins. One of the steps involves switching to payments in Indian currency as against the historical method of payment in Japanese Yen, which protects the Indian company from currency fluctuations.
Simultaneously the maker of Alto and Swift is boosting its local research and development (R&D) capabilities in order to reduce dependence on Suzuki, Japan. Last year Maruti Suzuki’s revenues surged past stand-alone revenues of that of its parent for the first time ever.
Three years ago Maruti Suzuki won its minority shareholder’s approval for sourcing cars made in Gujarat set up by its parent company Suzuki Motor Corporation. As per the arrangement between the two companies, the role of the Indian firm would be restricted to sales, marketing and distribution and not manufacturing.
“For every job created in Ashok Leyland there are ten jobs created outside. There are millions of youngsters who will come into the age brackets where they will require jobs. Unless you have an ecosystem which supports job creation we will not be able to create jobs for these people and therefore Make in India is very important. But it is incomplete without Design in India”, added Dasari.
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