Maruti in talks with Suzuki for new plants, taking capacity to 3 mn units

Maruti Suzuki, the country's biggest car maker, is in discussions with Japanese parent Suzuki Motor Corp for setting up new factories in India to hold its grip over the domestic car market.

The maker of Alto and Swift will have new capacities totalling 750,000 units per year, taking its total future installed capacity to a huge 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 at a completely new site.

Speaking to Moneycontrol, Maruti Suzuki managing director Kenichi Ayukawa 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 or should we look at some other site.''

Suzuki Motor Corp, which owns the Gujarat plant, has agreed to invest an estimated total of Rs13,400 crore in that state for 750,000 units per year capacity. This will be spread across three plants with 250,000 units per year capacity each. Suzuki has in effect become a contract manufacturer for Maruti Suzuki and has started manufacturing the new Swift.

For further addition of capacities, Maruti Suzuki 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," Ayukawa said.

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 in the new capacities, Ayukawa said, ''It depends on which way we would be sharing work (with Suzuki Motor), like for development of products. We have to share cost and investments.''

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. There was speculation that in the long run, Maruti Suzuki would turn into a shell company that only does marketing, sales and distribution.

The company has earmarked Rs4,000 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 every time and every year we try to start a new model. This includes full model change and minor model change. Those kinds of investments we have to make. Also for technology developments we used to be 100 per cent dependent on Japan but right now we do sharing of this work," said Ayukawa.