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Maruti to enter used car business this year

India's largest carmaker, Maruti Udyog Ltd, striving to break into profits, is finalising plans to enter the used car business this year, its chief executive said.

"We are in the process of finalising the business plan (to get into the used car business)...it will be this financial year," Jagdish Khattar, Maruti Udyog's managing director, said.

The automaker, in which the Indian government and Japan's Suzuki Motor Corp each hold 50 per cent stake, has a dominating 58 per cent share of the country's car market but was hit last year by sliding sales and higher costs.

Khattar said the company was working with consulting firm A T Kearney in drawing up the plan and the firm would help it with its implementation as well.

Several Indian car firms are contemplating an entry into India's used car business, with the local unit of Ford being the most recent entrant, in a bid to persuade customers to exchange older cars for new ones and help revive growth.

India's new car sales fell 7.5 per cent in the past financial year to March and sales in April-July have grown a mere 2.82 per cent.

The potential for Maruti's used cars business could be considered large since it has sold nearly 3.4 million cars in the domestic market since it began production in the mid-eighties.

Most other Indian car makers -- second-ranked Hyundai, third-ranked Tata Engineering and Locomotive Company Ltd and Ford -- are relatively younger companies, having begun selling cars only a few years ago.

Large dealer network

Maruti's used car business can also leverage its existing sales outlets which include 229 dealer outlets in 141 cities. Khattar said the company had still not made up its mind on whether to recondition cars made by other manufacturers as well.

It also has plans to get into other businesses including car financing, car insurance, and corporate lease and fleet management.

The chief executive of the Delhi-based carmaker also said the company would introduce an employee separation programme later this year as part of a larger cost cutting initiative.

A combination of adverse state taxes, higher costs and bruising price cuts pushed the automaker to an unaudited net loss of Rs 2.53 billion in the past year to March from a profit of Rs 3.3 billion in the previous year.

Its vehicle sales fell 13.7 per cent in 2000-01 but domestic car sales in April-August, the first five months of the current financial year, have rebounded to grow 11.9 per cent.

Earlier this year, the company's finance director told Reuters he expected revenues to rise 24.3 per cent in 2001-02 to Rs 115 billion from Rs 92.53 billion a year earlier.

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