The Maruti Story summary

A successor company, Maruti Udyog Ltd, was formally incorporated on February 24, 1981. In a highly controversial move, the previous company’s assets had been nationalized and were transferred to this new company. Critics alleged the move was designed primarily to financially benefit the Gandhi family rather than serve the public interest. 

Prime Minister Gandhi realized that the only way to counter political criticism was for the Maruti project to become a true success story. To achieve this, Maruti needed to combine the best talent from both the private and public sectors. Gandhi made the unprecedented move to appoint Sumant Moolgaokar, the respected chairman of Telco, as non-executive chairman. It was the first time a private sector CEO had been chosen to lead a public enterprise.

When Maruti Udyog took over Sanjay Gandhi’s factory, they found a facility that was falling apart. The original construction had been neglected, with a leaky roof, poor drainage, and large cracks in the concrete. Repairs had to be done quickly and under tough conditions, with SMC engineers working through the intense summer heat.

Another challenge was the unreliable power grid, with frequent outages and voltage swings. To solve this, the company took power into its own hands, so to speak, installing a multiple megawatt diesel generator and then finally gas powered turbines to create a total capacity of 60 megawatts. 

The Maruti 800, India's first modern car, rolled out of the Gurgaon factory in December 1983. The advance booking scheme had attracted over 135,000 bookings and fulfilling them meant quickly ramping up production. To accomplish this, many advancements and innovations would be needed. 

First among these was a smart, phased approach to manufacturing. Production started with SKD, or semi-knocked down, kits. The entire painted body and most components were imported from Japan and assembled at the plant, with only a few Indian-made parts. This was necessary because, at the start, not a single Suzuki component was available in India. This method let Maruti’s workers learn to assemble and test cars before more complex manufacturing began. As production ramped up, Maruti worked closely with Indian vendors and suppliers, sharing Japanese quality standards and technical know-how. This partnership helped create a new generation of Indian auto parts manufacturers and raised industry standards nationwide.

Things changed for Maruti after the Indian government’s 1986 budget. Duties on components rose by 5 percent, and at the same time, the yen strengthened against the rupee by 22 percent. These shifts caused costs to soar. Maruti had to raise prices, which led to a clear slowdown in sales.

Yet Bhargava saw an opportunity. Maruti was already the dominant player in India, with little real competition. Instead of becoming complacent, he wondered: what if Maruti expanded exports to the West? Competing in international markets could boost profits and push the company to keep improving. Chairman Krishnamurthy was skeptical, but Bhargava argued that the experience and confidence gained from global markets would be invaluable.