Financial Daily from THE HINDU group of publications
Thursday, Dec 04, 2003
Corporate - New Projects
Maruti plans diesel engine plant
Chennai , Dec. 3
MARUTI Udyog Ltd (MUL) is mulling the possibility of setting up a diesel engine assembly plant near its automobile manufacturing facilities at Gurgaon, near Delhi.
This could mark a distinct shift in the company's strategy regarding diesel engine options for its vehicles and it has the potential to redefine the dynamics of the small car market.
Company sources said that the plans are still in the initial stages and the exact details regarding size, investments and technology have not been finalised. The plan for setting up the new engine plant is essentially to provide for a continued presence in the diesel-driven vehicles market for Maruti Udyog, without depending on imported diesel engines.
Sources said that the proposed new plant or new assembly line, when completed, would cater to the diesel engine requirements for cars in both the B and C segments. Currently, the company is offering diesel engine options for the Zen and the Esteem. Both these cars feature the Peugeot TUD5 engine that the company has been importing in small numbers to cater to the niche segment of its diesel customers.
A new diesel engine, possibly from the new assembly, may replace the TUD5 by mid-2004. Further, the TUD5 engine will not be able to meet the proposed stringent Euro III emission norms that are scheduled to come into force from mid-2005. Meeting that standard will mean switching over to a CRDI type (common rail direct injection) engine.
Most of the demand for Maruti Udyog's's diesel engine variants comes from the southern States. The diesel-driven passenger vehicles market is, as yet, too big to be ignored. Companies like Toyota Kirloskar Motors, General Motors, Ford India, Fiat and Hindustan Motors have all ensured that a diesel engine option is offered for most of their products. While many of these companies have met with considerable success for their diesel options, Maruti Udyog has not been able to make much headway on the diesel front.
Company sources said that the strategy clearly revolves around the fact that diesel engine vehicles will continue to be an attractive proposition for most "fuel-efficiency-conscious" Indian car buyers, since the differential between the cost of petrol and diesel is unlikely to narrow down.
Maruti Udyog's experience with importing the Peugeot engine has also not been pleasant with erratic supplies at times threatening its production plans. This has necessitated importing and stocking up the engines. An in-house diesel engine assembly will enable the company to reduce its dependence on imports and at the same time allow it to offer diesel variants on many of its current future products.
Maruti Udyog's parent Suzuki Motor Corporation (SMC) of Japan is also not well-known for diesel engines. However, the Japanese company has been making forays into this market selectively for some of its products. SMC now offers a two-litre diesel engine for the Grand Vitara XL-7 and a 1.3 litre diesel burner for the Suzuki Ignis. Earlier this year, Suzuki had also tied up with Fiat Auto S.p.A of Italy for jointly developing a new sports utility vehicle that will be offered with both petrol and diesel engines.
However, it is not clear whether SMC (which has recently said that Maruti Udyog will be its R&D base outside of Japan) will be involved in providing or tying up technology for the diesel engine plant.
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