Maruti Suzuki India Ltd

NSE:MARUTI

Earnings Call Transcript 2022-Q4

[Operator]

Ladies and gentlemen, good day, and welcome to the Q4 FY '22 Earnings Conference Call of Maruti Suzuki India Limited.

[Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Pranav Ambaprasad. Thank you, and over to you, sir.

[Pranav Ambaprasad, executive]

Thank you, Margaret. Ladies and gentlemen, good afternoon, once again. May I introduce you to the management team from Maruti Suzuki. Today, we have with us our CFO, Mr. Ajay Seth; from Corporate, Executive Director, Corporate Planning and Government Affairs, Mr. Rahul Bharti; General Manager, Corporate Strategy and Investor Relations, Mr. Nikhil Vyas. From Finance, we have Executive Director, Mr. Pradeep Garg; Executive Adviser, Mr. D.D. Goyal; Executive Vice President, Mr. Sanjay Mathur, and Vice President Mr. Dinesh Gandhi.

The con call will begin with a brief statement on the performance and outlook of our business by Mr. Seth, after which, we'll be happy to receive your questions. May I remind you of the safe harbor. We may be making some forward-looking statements that have to be understood in conjunction with uncertainty and risks that the company faces.

We also like to inform you that the call is being recorded and the audio recording and the transcript will be available on our website. Please note that in case of any inadvertent error during this live audio call, a transcript will be provided with the corrected information. I would now like to invite our CFO, Mr. Seth. Over to you, sir.

[Ajay Seth, executive]

Thanks, Pranav. Good afternoon, ladies and gentlemen. I hope you and your families are healthy and safe. The country is again witnessing an uptick in number of COVID cases in certain regions. We are closely monitoring the development and taking all precautionary steps in the best interest of the employees' health and safety, including that of our value chain partners. Let me start with some highlights of financial year 2021-'22. The company launched 2 new products, new Baleno and new Celerio. Besides a highly fuel efficient powertrain, the company also offered many industry-first technological features in a compact segment car, such as heads-up displays, telematics, 360-degree camera, hill hold assist to improve customer convenience and safety. In the new Baleno, the increased fuel efficiency, coupled with the introduction of many technological features had an increase in its acceptability. Since its launch in February '22, new Baleno has received more than 80,000 bookings.

During the year, the company also launched product refreshers in Wagon R and extended its CNG product lineup with the introduction of Dzire CNG. The year saw customer preferences for CNG vehicles increasing further. The company sold over 230,000 CNG vehicles and registered highest ever sales for CNG vehicles in any financial year. The company continues to be the most preferred car brand in the country. In financial year '21-'22, 8 of the top 10 best-selling passenger vehicles were from Maruti Suzuki stable. The company's highly successful MPV, Ertiga, joined the top 10 best-selling passenger vehicles for the first time. We thank our customers for their continued trust on our products. We exported 238,376 vehicles in financial year '21-'22, which is the highest ever exports in any year by the company. The contribution of sales from nonurban markets in overall sales increased to 43.6% in financial year '21-'22. With strong focus on nonurban markets, the company attained a milestone of cumulative sales of 5 million cars.

In the month of March, our parent company's Suzuki Motor Corporation, through its subsidiary, Suzuki Motor Gujarat, signed a memorandum of understanding with the government of Gujarat to invest INR 104 billion in BEV batteries and BEV manufacturing capacity. This investment will greatly support in localizing the EV manufacturing and help the company to accelerate and expand its BEV product portfolio in India. The company is planning to introduce its first BEV by 2025. Taking a step towards a circular economy with an aim to promote the recycling of commodities, Maruti Suzuki and Toyota Tsusho Group's vehicle scrapping and recycling unit commenced operations. To enhance customers' convenience and satisfaction when buying a car, the company introduced Maruti Suzuki Smart Finance last year. This online end-to-end real-time car financing facility is now available across the country, with 16 financiers offering the car financing facility.

During the year, through MSSF cumulative auto loans of INR 175,000 million were disbursed to over 313,000 customers. On CSR, besides helping to quickly scale up the domestic manufacturing of PSA oxygen generators, along with its supplier partners, the company installed 25 PSA oxygen generator plants at various government hospitals in the country as part of CSR, comprising 11 plants from suppliers and 14 from the company. Together with the help of its parent company, Suzuki Motor Corporation donated 1,004 oxygen cylinders to various government hospitals.

Coming to the business environment. Just, before the start of the financial year '21-'22, there was a sense of optimism, driven by the good demand recovery of passenger vehicles in quarter 3 and 4 of the previous financial year. While subsiding COVID-19 cases, there was a general feeling that the pandemic is nearing an end and a phase of good economic recovery is on the horizon. The business plans of the company were also oriented towards capturing the market opportunity to the fullest. Preparing the ground for growth, the third manufacturing plant in Gujarat with a capacity of 250,000 units was operationalized in April '21. However, the second wave of COVID-19 at the start of financial year created a disruption in the first quarter, and electronic component shortage for the rest of the year. The company could not produce an estimated 270,000 vehicles, mostly domestic models owing to electronic component shortage. As at the end of the year, the company had pending customer orders of about 268,000 vehicles, for which it is making full efforts to fulfill at the earliest.

During financial year '21-'22, the company's sales volumes in the domestic passenger vehicle market grew by 2.9%, including the sales of light commercial vehicles. The overall sales in the domestic market for the grew by 3.2%. The shortage of electronic components largely affected the production of vehicles sold in the domestic market and not as much the production of vehicles for exports. As a result, the company was able to fulfill the export orders and recorded the highest ever vehicle exports of 238,376 units. The supply situation of electronic component continues to be unpredictable. It might have some impact on the production volumes for 2022, '23 as well.

On cost side challenges, the price of commodities such as steel, aluminum and precious metals, witnessed an unprecedented increase during the year. The company was supposed to increase prices of vehicles to partially offset the impact. The company continued to work on cost reduction efforts to minimize the impact of -- impact to customers. Now let me talk about the financial results.

The company sold a total of 488,830 vehicles during the quarter, lower by 0.7% compared to the same period previous year. The sales in the domestic market stood at 420,376 units, a decline of 8% over that in Q4 financial year '21. The sales in the export markets were at 68,454 units, which is the highest ever in any quarter. During the quarter, the company registered net sales of INR 255,140 million, an increase of 11.1% as compared to same period in the previous year. With this, the operating profit for the quarter stood at INR 17,796 million, a growth of 42.4% over that of Q4 financial year '21. Net profit for the quarter stood at INR 18,389 million, higher by 57.7% compared to the same period last year.

The company sold a total of 1,652,653 vehicles during the year, up 13.4% over the previous year. The sales in the domestic market stood at 1,414,277 units, an increase of 3.9% over financial year 2021. The company recorded its highest ever export of 238,376 units in financial year '21-'22 compared to 96,139 units in financial year 2021. This was also about 62% higher than the peak exports in any financial year so far. During the period, the company registered net sales of INR 837,981 million, compared to INR 665,621 million in the previous financial year.

Despite a 26% increase in net sales, the net profit for the period declined by 11% over previous year to INR 37,663 million. Though the profit in financial year '21-'22 were lower, the Board of Directors recommended a dividend of INR 60 per share or the face value of INR 5 per share compared to INR 45 per share in last financial year. This is a special onetime gesture to thank shareholders for their patronage and support as the company commemorates its 40th year since its inception. Thank you, and we are ready to take your questions, suggestions.

[Operator]

[Operator Instructions] The first question is from the line of Raghunandhan N.L. from Emkay Global.

[Raghunandhan N. L., analyst]

Congratulations on good set of numbers. Sir, firstly, on the order book side, can you indicate what would be the current order book? I think media has been indicating around 326,000? and also, can you share what was the retails in last quarter?

My second question was your peers have started launching hybrids. Would you be going ahead with hybrid launches in future? Would your upcoming SUVs have hybrid options?

[Unknown Executive]

So you're right, the current order book is more than 3.2 lakhs. And we hope we'll be able to fulfill these orders fast. We don't want our customers to be waiting. The retail number in quarter 4, including LCV segment is 372,000.

Let's talk about hybrid. So hybrids are a very powerful technology, which can work in conjunction along with EVs to help reduce carbon and reduce oil import. They are -- they do about 30% to 40% of the job of an EV and are many times more scalable. So it would be an interesting option, and we'll be looking forward to such technologies in the future.

[Raghunandhan N. L., analyst]

And would you be able to quantify how severe could be the iron cost impact for June quarter, sir, given the last 2 months commodity inflation?

[Unknown Executive]

Difficult to predict at this point in time as commodities have firmed up, still we find increase in the steel cost because the demand from steel buyers is significantly higher at this point in time. But it's under negotiation. We find that the precious materials, which have gone up earlier immediately after the war have kind of now settled down. There are concerns largely on steel and some other commodities like aluminum and copper, et cetera. It's difficult to now give you a guidance at this point in time. We are waiting and watching and will also depend on how demand and supply pans out in the near future.

[Operator]

The next question is from the line of Kapil Singh from Nomura.

[Kapil Singh, analyst]

Firstly, I wanted to set regarding the demand outlook for next year. There has been an increase in oil prices. And some of the segments have shown a slowdown in rural consumption as well. So what are you seeing in terms of current situation on incoming order inflow, particularly on rural side for FY '23?

[Unknown Executive]

So industry estimates of the passenger vehicle segment are between INR 34 lakhs to INR 35 lakhs, talking about pure demand. But this is subject to supply side constraints, and so we'll have to look forward. And of course, we would also like to -- we share a similar estimate of the industry.

[Kapil Singh, analyst]

Okay. And sir, the second question is on EV. One school of thought is that EV's will start to become significant much faster. For example, market size of somewhere between 50,000 to 100,000 in the current financial year itself, and 100,000 plus in FY '24. So -- and perhaps market could directly graduate to EVs instead of hybrid. So just wanted your thoughts on this aspect.

[Unknown Executive]

So if EVs grow, it is good for all. It is good for us also. And as we have already announced that we'll be having a production plant in Gujarat. So we'll be there and we will be there with localization. Secondly, it is not EV versus hybrid, it is EV and hybrid. There's a good synergy between them, and they're both together help us achieve the aim. So the penetration grows, it is good for all.

[Kapil Singh, analyst]

Okay. And lastly, could you share what is the average discount and the inventory level and also give spare parts sales?

[Unknown Executive]

Discounts were in this quarter were at 11,150. They were lower compared to last year same quarter was 16,642, and in quarter 3, they were at about 15,000. So they are much lower than return on average discounts that we have been mentioning in the previous 3 or 4 quarters. I don't have the spare part separate number with me now, we will get back to you.

[Kapil Singh, analyst]

And inventories?

[Unknown Executive]

The latest stock was at about 40,000 cars as of end of quarter 4, yes, as of the middle of April.

[Operator]

Next question is from the line of Pramod Kumar from UBS.

[Pramod Kumar, analyst]

Sir, my first question pertains to the export end of the market because it's been a phenomenal growth when the rest of the industry hasn't done that well in exports this year, but just want to understand what's the outlook here? Because you do talk about order backlog number for the domestic market. If you can help us understand and talk a bit more about the export opportunity here because the -- and whether these volumes and this kind of a growth is sustainable or not? And what is the longer-term view you have on the export opportunity as a percentage of your overall volumes? If you can help us understand that? And also some bit of color on the end markets, what are the kind of countries where you're finding such stuff and what more can be done with the new upcoming launch pipeline along with Toyota? So if you can help us get more color on the export opportunity here.

[Unknown Executive]

So, Pramod export is a good opportunity. And we've -- of course, over the years, Maruti started exports to Europe way back in 1988, and we've been working all through. Since 2 years, we've also renewed our efforts, particularly in light of the government's focus on this area. So primarily, the reasons -- the measures that we took that helped us become successful here were more products, big increase in network presence, of course, the reach out through the Toyota channel, and use of a lot of innovative domestic selling practices through distributors in these countries.

In terms of geographies, Africa turned out to be a big -- the #1 market, the continent of Africa, and the numbers have been going good. The positive part is that these levels are sustainable. So of course, we have grown steeply, so now we would like to consolidate a bit here. And we will keep our position strong in exports in the future also.

[Pramod Kumar, analyst]

And this is for on the domestic side. We've been talking about getting back to the 50% market share as early as possible. But they've been lagging on the data for various other reasons, including semi, but competition has been navigating that problem better. So I just want to understand, are there any time lines you have with the new launch pipeline coming in this year and next year? How quickly would you like to get back to the 50% volume share because the high 50% volume share this time around will also come with higher revenue share given the way the industry has kind of premiumize and your product mix portfolio, which will premiumize. So if you can help us understand how quickly can we get back to that 50% mark?

[Rahul Bharti, executive]

So of course, as a market leader, our target will be to be at 50% market share or more. There's a number of factors responsible for this. One, the semiconductor shortage. With a 3 lakh pending orders, if we service that then the numbers and market share would be much higher. Second, in the non-SUV segment, our market share is above 65%. It has gone up. So in every segment, other than SUVs, our market share has gone up. So whenever we launch SUVs, of course, the market share has to improve. A launch is something -- I mean new products, we do not -- this year will be a good year in terms of launches. But specific information, we would like you to wait and see the excitement for yourself.

[Pramod Kumar, analyst]

But Rahul, is it logical to expect that '24 should be a year by when you should recoup most of the market share losses at your end because the launches will be live, you would have already spent on ramp-up and all of that and pandemic situation is also normalized. So is it optimistic to expect that '24 you should get back to that level?

[Rahul Bharti, executive]

We can't give you specific milestones or specific guidance, but you can be rest assured we are very enthusiastic here to get back market share.

[Pramod Kumar, analyst]

And last request, more than a question to Ajay sir, if you can help us provide more color on commodity because some of the other auto companies have been more kind of sharing more color in terms of what the kind of expected cost inflation for 1Q, what they're expecting? Because we've seen commodity benefits in 4Q. A lot of this will reverse out. So if you can just help us understand the near-term headwind in terms of what the kind of improvement what you have seen and what the kind of expected price cost inflation will play out in the first quarter or so, if you can -- anything which you can provide there, that would be very helpful, sir.

[Ajay Seth, executive]

See with whatever discussions that we've been having with our supply chain colleagues, so we understand that steel has -- the steel is almost 50% of the commodity exposure that we have. And steel is firming up. And there is -- obviously, these steelmakers are asking for a big price increase, which is obviously under negotiation at this point in time. But we do expect that in the first quarter or in the first half, there will be increase far as steel is concerned. So that's one part.

The precious metals have -- was shade higher earlier, after cooling down again they went up because of the Russia war, but they have now again cooled down. So we don't see -- at this point in time, we don't see too much impact of precious metals. There are some -- because of some commodities, which are petrol-based where we see some increase there as well.

So it's a mixed bag where some commodities are now kind of stable and some commodities we see increase. So overall, I think the commodity will go up. It's very difficult for me to give you a number at this point in time by how much, but definitely, there will be increase in commodities in the first quarter.

[Pramod Kumar, analyst]

Just how much of the improvement in 4Q versus 3Q? Because there will be a bit of improvement because of the Gujarat ramp up itself. Your acquisition cost comes down as the volumes ramp up. But except that pure commodity to commodity, what are the kind of changes in 4Q versus 3Q? Because you used to kind of share that number earlier in terms of directionally as to what is the delta from commodity.

[Ajay Seth, executive]

So in terms of the impact of ramping up capacities will really be on the operating leverage. Whereas you can see in the results that results in the fourth quarter are better because you had a better operating leverage compared to the earlier quarters, right? But in terms of commodities, there has not been any reduction in the quarter 4 on account of commodities. Whatever commodity reductions happened, which is very small has been also offset because of other factors because we had to do some market purchase of semiconductors and things like that. So there has not been any impact of commodities in quarter -- from quarter 3 to quarter 4. As a contrast, they haven't gone down.

[Operator]

The next question is from the line of Yogesh Aggarwal from HSBC.

[Yogesh Aggarwal, analyst]

Sir, just 2 quick questions. Firstly, for Ajay, sir. I think Chairman talked about INR 50 billion CapEx for FY '23. And I saw free cash flow last year itself was pretty weak. I think it was a negative free cash flow. So anything around that, what led to this weakness in free cash flow? And what sir you think about FY '23?

And secondly, I wanted to ask on CNG. I remember a large share of the order book was CNG last few quarters. So what do you think of the supply just around CNG in terms of monthly run rate? How much can we achieve in the coming months?

[Ajay Seth, executive]

CapEx of INR 5,000 crores is something that we've committed for the next year, and these are on various projects, including the new model launches, et cetera. And besides this, the point that you made on cash flows, there was an incremental increase in the overall cash from previous year to this year. No. There was no increase in cash flow. But what -- I think what we need to look at also is the impact that we had on our working capital last year because the activity was down, and therefore, the negative working capital that we usually get squeezed last year from all of that. And this year, if the volumes go up, then of course, there will be release of working capital. To that extent, we will see the cash going up again. So I think we'll be able to manage the INR 5,000 crores through our internal generation during the year, and we should not see any reduction in terms of our overall cash flow numbers. Okay.

[Yogesh Aggarwal, analyst]

Okay. And on CNG?

[Rahul Bharti, executive]

Just give me a second.

[Ajay Seth, executive]

So this cash flow that I'm talking about is for the year '22-'23. '21-'22, you would have seen a dip because of the reasons that I told you. But I'm now saying that in '22-'23, with incremental activity and the negative working capital cycle that we work with, we should be able to add some more cash in the balance sheet. Okay?

[Yogesh Aggarwal, analyst]

Right. And sir, just to confirm, this INR 13 billion negative reval of debt mutual fund that doesn't hit P&L, right, going forward. That's just -- that will normalize with time?

[Ajay Seth, executive]

Which one?

[Yogesh Aggarwal, analyst]

The negative valuation on debt mutual funds.

[Ajay Seth, executive]

No, no. We have to do mark-to-market every quarter. So whatever is the impact on account of mark-to-market that's reflected in the P&L, each quarter.

[Yogesh Aggarwal, analyst]

Yes. So it's already, done. Okay.

[Rahul Bharti, executive]

On CNG, almost about 40% of the backlog, the pending orders are on CNG. So the wait list is slightly higher because of semiconductor chips, but we'll try to service these orders.

[Operator]

The next question is from the line of Kumar Rakesh from BNP Paribas.

[Kumar Rakesh, analyst]

First of all, thank you to Mr. Srivastava and team for quantifying the number of model launches and refreshers this year, gives a very useful direction and stance to about the product interventions. My first question was about the historical seasonality, which we have seen in the June quarter where the volume typically gets from the March quarter. Given that we are sitting with...

[Rahul Bharti, executive]

Can you speak louder please. It's not clear.

[Kumar Rakesh, analyst]

Is this better?

[Rahul Bharti, executive]

Slightly.

[Operator]

Mr. Rakesh, if possible, can you come closer to the phone and on handset mode. I'm not sure if you are on speaker.

[Kumar Rakesh, analyst]

Sure. My question was first on the...

[Operator]

Sorry, your voice is breaking right now. We cannot hear you clearly. Rakesh, we lost your audio. Please confirm if you can hear us. Rakesh please unmute yourself and confirm. We seem to have lost his line, so while we wait for him to join back, we'll take the next question, which is from the line of Amyn Pirani from JPMorgan.

[Amyn Pirani, analyst]

Yes. Firstly, just a bookkeeping question. What was the Gujarat volumes in this quarter?

[Operator]

Members of the management, we cannot hear you.

[Rahul Bharti, executive]

Sorry, Gujarat was about 165,000. We were muted -- in the quarter.

[Amyn Pirani, analyst]

Yes, yes, sorry. Now I have -- my second question was, in this quarter, we've seen a sharp jump in other operating income. Is there anything that you would like to highlight here as to -- or is it just volume linked?

[Ajay Seth, executive]

Some of this is increase in the scrap sales rates, et cetera. So the income has gone up because of that. There is one exceptional item of about INR 100 crores, which is basically grouping issue, which is coming in income as well as in expense. So the way it has to be shown in accounting, it has to be shown in expense as well as an income. We can't net at all. So therefore, in this quarter, you're seeing that exceptional INR 100 crores coming in expenses as well as in other operating income.

[Amyn Pirani, analyst]

That's related to you maintaining the same ex-showroom price across the country and the GST thing, is that's related to that?

[Ajay Seth, executive]

Is not to do with the -- that's one reason, but is to do with some other adjustment in accounting that has been done for expense and income. So therefore, you find this gap in this quarter. But I think it will get normalized moving forward.

[Operator]

The next question is from the line of Joseph George from IIFL.

[Joseph George, analyst]

I have 2 questions. One is in relation to the retail number that you gave for the third quarter. So on one hand, you mentioned that you have a very strong order book. What I noticed is that the retails that you gave for the quarter was about 373,000,which is about 30,000 lower than the wholesale. So why is that kind of a mismatch when you have such a strong order book?

[Operator]

Members of the management, please unmute your line.

[Rahul Bharti, executive]

See, we have only about 40,000 closing stock. So to that extent, we have to work with variants and colors, et cetera. So that's the reason.

[Joseph George, analyst]

Okay. So it's got to do with the mix impact. Got it. So does it mean that at the end of December, you had your 0 levels of inventories, I mean, approximately?

[Rahul Bharti, executive]

So last year, we were working with a good level of inventories. Now our inventories have thinned out.

[Joseph George, analyst]

Okay. Okay. All right. Got it. The second thing I want to check was with respect to the chip issue. So you mentioned that you expect some impact in FY '23 as well. But would it be possible to indicate what percent would be the hit? So in the past, I remember in September, October, November, you used to put out press releases saying that in the next month, you would work at 80% of your planned production or 90% of your planned production. Similarly, would it be possible for you to indicate what the near-term outlook is if your planned production is x because of chip shortage, how much would it come down by?

[Rahul Bharti, executive]

The situation is quite dynamic. So what we have done is we have given a general statement through the year that this will be a challenge, and we will keep trying to maximize our numbers. Last year, in 1 particular month, we were at 40%, 60%. So it was important to make a disclosure. But generally, chips will be -- will continue to be a challenge in this year also. And of course, we'll try to maximize our numbers.

[Operator]

The next question is from the line of Kumar Rakesh from BNP Paribas.

[Kumar Rakesh, analyst]

My first question is that historically, we have noticed the seasonality in June quarter, where the volume declines from March level. Given that we have a very strong order book, should we expect that usual seasonality should not be there in the June quarter, assuming no incremental impact on the semiconductor supply issue?

[Rahul Bharti, executive]

So this time, the determining factor will be semiconductor. Of course, demand exists. So at the moment, demand is good, we'll have to go by supply.

[Kumar Rakesh, analyst]

Right. And second question was around exports. So we have seen pretty strong ramp up there. At the same time, we are running a very large order book in the domestic market. So any strategic reason for prioritizing that export markets over the domestic market?

[Rahul Bharti, executive]

No, no, no. It is not a question of our strategizing. It's a question of chip availability. So the specs are different, the sources of chips in the export models are different. If we had an option, we would obviously have the domestic market first. Since we could not produce those domestic models and the chip shortage did not affect the export models, therefore, we used the export opportunity.

[Kumar Rakesh, analyst]

Understood. One final clarification on the order book part. You said that current order book is more than 320,000 units. So that's more than 50,000 increase in less than a month's time. So has that -- the underlying demand is significantly accelerated or are production is fast-forward than where it was earlier in this year?

[Rahul Bharti, executive]

New Baleno also.

[Kumar Rakesh, analyst]

Okay.

[Rahul Bharti, executive]

We have the Ertiga and the XL-6 launch also.

[Operator]

The next question is from the line of Pramod Amthe from Incred Capital.

[Pramod Amthe, analyst]

So first question is with regard to your standing on CAFE for FY '22. What's the number you're able to achieve on 0 to 1? And what's the -- if you can give us some color in terms of how does CNG helps you versus gasoline or the other motor fuels to reach this goal?

[Rahul Bharti, executive]

It was not very clear, but if I got you right, so Maruti is best positioned among all car manufacturers on CO2 as measured by the CAFE Norm. We have the least CO2 in the weighted average number for our entire fleet, and we hope to keep our leadership there. On your question on CNG, it helps us give about a 20% to 25% benefit in CO2 with respect to gasoline.

[Pramod Amthe, analyst]

Okay. And would you like to disclose where your CO2 stands for FY '22? And is it substantially below norms?

[Rahul Bharti, executive]

So these figures come into the public domain on the website -- on the government website, MoRTH website. But the last figure we had was about 113 grams per kilometer weighted average.

[Pramod Amthe, analyst]

Second question is regarding...

[Rahul Bharti, executive]

Sorry, I'd like to clarify. We have to keep in mind that after BS VI, the measurement of CO2 has become more stringent. So the CO2 numbers with the BS VI methodology and the BS IV methodologies will -- are not comparable.

[Pramod Amthe, analyst]

Okay. Sure. You are saying it will go up just because of BS VI and then with your efforts, it has come down?

[Rahul Bharti, executive]

Yes. BS VI makes it more stringent to achieve CO2 reduction. CO2, the same model, if tested on BS VI methodology will show higher CO2.

[Pramod Amthe, analyst]

Sure. Second is with regard to the CapEx side. You have -- you've already done this year, FY '22, a big number. I think it's because of the new land acquisition and you're guiding for the, again, a lumpy number. Would you also give in terms of where this is going to be spent? And incrementally, where is it going into, if we have to look at the 2 years back, and where are you spending and directionally where it will take you?

Second, related to the same is, you have won under the component PLI. What is the effort there? What is the CapEx commitment towards the same? And how it will strengthen Maruti over next 3 to 4 years?

[Rahul Bharti, executive]

So I'll take the PLI question first. So we had applied along with our contract sister company, SMG in the auto scheme, and we had applied in the auto component scheme also, both -- so SMG, EV scheme and the component scheme both have been approved. So the government has a threshold of investment for every year. We will be meeting that requirement. In fact, if you go by the recent announcement, our total investment will be about INR 10,000 crores on the EV and its battery. So that we will be going ahead with.

[Pramod Amthe, analyst]

And specific to the component because that is flow through the Maruti, right, balance sheet where we need to be focused on? Which areas you plan to focus?

[Rahul Bharti, executive]

The component scheme will be on Maruti balance sheet. The EV PLI is on SMG balance sheet.

[Pramod Amthe, analyst]

So you are only unique in terms of doing the component spend, right? Compared to other carmakers or automakers. So hence, I wanted to know where is that effort going to be and how your localization can change or the cost of producing them can drastically change over 3, 4 years if you can give some color.

[Rahul Bharti, executive]

So components, other manufacturers have also applied for components also. There's a long list of components where you can call AAT, automotive -- advanced automotive technology. So we can club more technologies. So we had applied for CNG.

[Operator]

Ladies and gentlemen, due to time constraints, that was the last question for today. We thank all the participants for joining this conference call. On behalf of Maruti Suzuki India Limited, we thank you for joining us, and you may now disconnect your lines.