SUZUKI Motor Corporation and Maruti Udyog Ltd are set to invest over Rs 6,000 crore in the country over the next four-five years towards setting up a new car assembly unit, a diesel engine manufacturing unit as well as increasing automation and efficiencies in Maruti's current facilities, apart from research and development (R&D).

At a press briefing after the Maruti board meeting on Thursday, the Maruti Udyog Chairman, Mr S. Nakanishi, also announced that the company would hold a 70 per cent stake in the new joint venture, under which a car assembly unit is being set up; Suzuki would hold the balance. The new unit, which would make high-end cars, is being set up in Manesar, Gurgaon, and would have a capacity to produce 250,000 units a year.

The proposed diesel engine unit, meanwhile, would be set up under Suzuki Metals India, an existing 49:51 joint venture between Maruti and Suzuki, respectively. Market analysts, however, point out that the shareholding pattern of the venture is likely to change once the investment details are finalised.

According to Mr Jagdish Khattar, Managing Director of Maruti Udyog, the diesel plant will have a capacity of over 300,000 units a year and will supply diesel engines to Maruti as well as export engines to Suzuki subsidiaries in Europe and Asia.

"The total investment in the unit could be about Rs 1,000 crore, as the capacity at the unit is now higher than what it was envisaged earlier. Previously, the diesel plant was to have a production capacity of 100,000 units with an investment of Rs 350 crore," he said.

Suzuki would also soon undertake a feasibility study to set up a gearbox production unit in India, Mr Nakanishi said. He added that the unit would be set up under Suzuki Metals India, which is likely to be renamed Suzuki Engineering India.

While the decisions at Thursday's board meeting allayed worries that Maruti may be sidelined in the parent company's future strategy in the country, the likely investment of Rs 6,000 crore has raised fresh concerns that a large proportion of the investment will be borne by Maruti. This could put pressure on the company's profitability in the coming years. According to market analysts, it was this concern over profitability that led to a dip in Maruti's share price by 1.72 per cent on the BSE to Rs 363 on Thursday.

However, Mr Khattar sought to allay these fears, stating, "We didn't want to burden the investments on just one company. By having these joint ventures, we are hedging and distributing the risks. Also, the new company and Maruti will co-exist, with production facilities of both companies sharing learnings and benchmarking with each other in areas of quality, cost and productivity."

He also pointed out that the new unit will be purely a production unit and issues related to marketing, distribution, vendor development and so on would be dealt with by Maruti.

Further, Suzuki's R&D would also be made available to Maruti, helping the company develop new models and increase production at its current plant through automation processes.

According to Mr Nakanishi, Maruti would introduce a new model, Swift, in the country next year, which would be produced at Maruti's current plant. The car is positioned in the premium hatchback category and would compete with the Hyundai Getz.

Meanwhile, on Suzuki's proposed two-wheeler facility in India, Mr Nakanishi said the company would start making motorcycles and scooters by end-2005 through a joint venture, in which it has 51 per cent stake. The two-wheeler unit will have a capacity of 250,000 units a year.

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