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Exclusive: Maruti Suzuki in talks to set up 750,000 capacity plant, may invest in Gujarat

February 13, 2018
Maruti Suzuki, the country’s biggest car maker, is discussing with parent Suzuki Motor Corporation for setting up new factories in India aimed at defending its iron grip over the domestic car market.

The maker of Alto and Swift will have new capacities totaling 750,000 units per year for itself taking its total future installed capacity to a staggering 3 million units per annum. The new capacities could either come up in Gujarat, where its parent has started operations with its first plant or it could come at a completely new site.

Speaking exclusively to Moneycontrol, Kenichi Ayukawa, Managing Director, Maruti Suzuki said, “Right now, the capacity of (the) Gujarat plant is 250,000 units per annum. We have started construction of the second plant, which will start operations in 2019. We are also requesting a third plant there and a decision on starting operations will be taken this year. There is a capacity of 750,000 per year for the future in Gujarat. And in the Haryana plant, we have a capacity of 1.5 million. Together, we would have a capacity of 2.25 million. After that, we have to consider if we want to have another factory in Gujarat and then should we look at some other site.”

Parent Suzuki Motor Corporation (SMC), which owns the Gujarat plant, has agreed to invest an estimated total of 13,400 crore in that state for 750,000 units per year capacity. This will be spread across three plants having 250,000 units per year capacity. SMC has thus become a contract manufacturer for Maruti Suzuki and has started manufacturing of the new Swift.
But for further addition of capacities, the car market leader is discussing various possibilities, including funding its own capacity addition programme.

“For the 750,000 units capacity plant in Gujarat, Suzuki Motor Corporation will invest but beyond that, we have to discuss."

Haryana has two sites – Gurgaon with 700,000 units capacity and Manesar with 800,000 units per annum capacity. We need to set up additional 750,000 units per annum capacity which could either be in Gujarat or elsewhere depending on various conditions,” added Ayukawa.

When asked if Maruti Suzuki would invest for the new capacities Ayukawa said, “It depends on which way we would be sharing work (with SMC), like for development of products. We have to share cost and investments,” added Ayukawa.

Maruti Suzuki faced a strong backlash from investors immediately after it declared that the new plant in Gujarat would be owned and run by SMC. Market watchers speculated that in the long run, Maruti Suzuki would turn into a shell company that only does marketing, sales and distribution.

The company has earmarked Rs 4,000 crore as capital expenditure for the coming financial year. This would be spent in areas such as product development, engineering maintenance of plant and network development.

“Our parent company invested in Gujarat. But we have to modify our factory everytime and every year we try to start (production) of a new model this includes full model change and minor model change. Those kind of investments we have to make. Also for technology developments we used to 100 percent dependent on Japan but right now we do sharing for work," added Ayukawa.

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