Maruti Suzuki Calls for Deep Localisation Down to Tier-3 Suppliers as Global Supply Chains Shift

Maruti Suzuki India has called on the automotive industry to deepen localisation across the supply chain, including among Tier-2 and Tier-3 suppliers, as global companies increasingly prioritise reliability and continuity alongside cost when making sourcing decisions.

Hisashi Takeuchi, Managing Director and CEO of Maruti Suzuki India, said global supply chains are being reconfigured, creating an opportunity for India to emerge as a trusted manufacturing and supply chain hub. He was speaking at the 66th annual session of the Automotive Component Manufacturers Association of India (ACMA) on Wednesday.

“Deep localisation is about reducing our exposure to external disruptions by strengthening domestic capabilities and progressively owning a larger share of the value chain,” Takeuchi said.

He said conditions for deeper localisation in India have become more favourable. Apart from the restructuring of global supply chains, Takeuchi pointed to government support through measures such as production-linked incentive schemes and the India Semiconductor Mission, which are helping create capabilities in critical areas and reduce strategic dependencies.

Scale is another factor supporting localisation, he said. Takeuchi said GST 2.0 has accelerated growth in the domestic automobile market even as India's export potential continues to strengthen.

Together, these factors are creating the scale required to justify investment in technologies that were previously difficult to manufacture competitively in India, he said.

Tier-2, Tier-3 Suppliers Need to Step Up

Takeuchi, however, cautioned that localisation alone would not make the Indian automotive industry globally competitive.

Products made in India must be able to compete with the best globally, requiring stronger quality standards across the entire supplier ecosystem.

“That requires quality to become our signature,” Takeuchi said.

He said competitiveness cannot be built by an individual company and has to extend across the ecosystem.

“Unless our Tier-2 and Tier-3 suppliers are capable, we can’t produce world-class quality,” he said.

Automakers and larger suppliers, therefore, need to extend support beyond their immediate vendors and help Tier-2 and Tier-3 companies strengthen their technology, quality systems and engineering capabilities, Takeuchi said.

Better communication across the supply chain will also be important so companies can react faster and coordinate their responses when disruptions occur.

Capacity Needs to Be Flexible

The Maruti Suzuki chief also called for greater flexibility as companies add capacity.

The Indian automobile industry is expanding production capacity to address growing demand, but Takeuchi said manufacturers also need to account for market fluctuations.

“Advance planning of capacity expansion and building flexibility in manufacturing is the key to address this issue,” he said.

The comments come as vehicle and component manufacturers invest in new plants and technologies to serve both the domestic market and exports.

People Should Be Seen as Assets, Not Costs

Takeuchi identified people as another important factor that will determine how effectively the industry handles future disruptions.

He said human resources are often viewed primarily as an expense on a company's profit and loss account, and called for a change in that approach.

“We should view people as assets on the balance sheet,” Takeuchi said.

Capability development should consequently be considered an investment rather than a cost, he said. Companies investing in their workforce would also be better positioned to attract and retain talent as competition for skilled workers increases.

Maruti Builds Supplier Learning Repository

Takeuchi also called for greater sharing of lessons across the automotive supply chain, saying every company did not need to experience the same disruption before learning how to address it.

“A challenge faced by one component manufacturer can become a source of learning for the entire ecosystem,” he said.

Maruti Suzuki has been creating platforms to facilitate this sharing among suppliers. Its Digital Library initiative is building a repository of case studies that can be accessed across its supplier ecosystem.

“If one company develops an effective response to a challenge, that learning should benefit the broader industry,” Takeuchi said.

Using Technology to Anticipate Supply Disruptions

Technology will also play a larger role in moving companies from responding to disruptions after they happen to identifying risks earlier, Takeuchi said.

Maruti Suzuki is geo-mapping supplier locations and integrating local weather intelligence to provide advance alerts about possible disruptions. The alerts give the automaker and its suppliers additional time to prepare.

“The objective is not to predict every disruption. That is impossible. The objective is to identify risks early enough to take countermeasures,” he said.

Takeuchi also warned that greater digitalisation brings growing cybersecurity risks.

While automotive companies are strengthening their cybersecurity systems, hackers are also becoming more sophisticated, he said. Companies therefore need not only stronger defences but also contingency plans to restore business operations quickly in case an attack succeeds.

“We have to ensure that we stay one step ahead of them,” Takeuchi said. At the same time, companies must be prepared for the possibility of a cyber incident and have systems in place to minimise disruption and restart operations quickly.

Takeuchi framed deep localisation, people, collective learning and technology as four key enablers for taking the Indian automotive industry beyond simply surviving disruptions.

“The last decade taught us how to withstand disruption. The next decade must help us become stronger because of disruption,” he said.

(With inputs from Kiran, Mugdha, Ketan and Prerna)