Maruti Suzuki India will produce fewer cars and cut production cost by 5 per cent for all its cars in the face of the global economic meltdown, in order to maintain the 2.5 per cent sales growth it achieved in the first half of FY09.

The company will also make lesser number of cars in the face of a demand slowdown. Production will now be 4.5 per cent more than last year's compared with an initial target of a 10 per cent increase. The company produced 757,092 cars, vans and utility vehicles in the year ended March 31.

Maruti Suzuki's sales fell 7 per cent in October. Totally passenger car sales in the country have declined in three of the past four months as banks tightened lending. Overall sales fell 6.6 per cent in October, the highest in more than three years.

The company is working with its vendors to reduce supplier costs in order to cuts production costs.

Maruti's Gurgaon and Manesar plant together can roll out 9.4 lakh cars a year.

Maruti's managing executive officer MM Singh said the company has taken a special drive to cut production of cars and was also constantly reviewing production to bring down wastage. At the same time, it was looking into the systems of its suppliers to bring down their costs too.

The company sources 80 per cent of the components used in its cars from different vendors while the remaining 20 per cent are sourced from within the company. The company is also trying to cut logistics cost.

The aim of the cost cutting exercise is to maintain a growth of 2.5 per cent in the second half the fiscal year as well.

Maruti Suzuki is hiking capacity at its Manesar plant to 3 lakh units by January 2009 and has set a sales target of 1 million cars domestically and a 2 lakh target for exports by 2010-11.

Meanwhile, Maruti Suzuki wants to begin manufacturing cars right from scratch in India by the end of 2010. Sources say the company has been hiring aggressively in disciplines such as design, electrical and mechanical engineering as it will be working on a model that is conceived, developed and designed at Maruti by its own engineering team.

The company, which will rely completely on local talent for the project, plans to hire 1,000 Indian engineers by 2010.

Suzuki Motors Corporation, a few months earlier, had announced that its Haryana facility would become its global hub for research and development. The company is also inclined to earmark its Indian operations as its global design centre for small cars.

The company has applied to the Haryana government for land to set up a state-of-the-art R&D centre as part of the Rs9,000 crore expansion plan announced a few years ago and a test track, at par with the facility at Suzuki, Japan.
 
This would be the only R&D centre for cars outside Japan for Suzuki.

According to the company, the Maruti plant in Gurgaon is one of the most efficient vehicle manufacturing facilities among Suzuki's overseas subsidiaries in terms of productivity. It is also the largest overseas plant of Suzuki, with an annual production capacity of 3.5 lakh cars.

Maruti Suzuki has already acquired the capability to conduct minor and major facelifts, and upgrade products in terms of technology and features. Currently, Indian engineers are collaborating with engineers at its global headquarters in Japan. The Indian R&D team has also been involved in the development of Swift, Dzire and SX4, though it was conceived in Japan. Maruti Suzuki's R&D capabilities began with modifying Suzuki cars to Indian conditions and have been growing in line with the company's rising sales performance. The team has already developed compact car A- Star. A CNG variant of the model is also expected in the medium term.