The Hindu Business Line : Auto majors line up big investment plans

In top gear
Maruti to make new small car for domestic, export markets
Honda to set up second plant at an investment of $200 m
Auto sector could grow to $145 billion by 2016: Minister

New Delhi , Sept. 7

The Indian auto sector saw a slew of big-ticket announcements on Thursday, including a fresh Rs 3,000-crore investment from Maruti Udyog and a $200-million (Rs 900-crore) investment plan from Honda Siel.

Both the auto majors are eyeing the small car market, with Maruti planning a new model and Honda Siel poised to make a debut in the segment.

The turnover of the Indian automobile sector could grow to $145 billion by the year 2016, according to the Heavy Industries and Public Enterprises Minister, Mr Santosh Mohan Dev.

He was addressing a Society of Indian Automobile Manufacturers (SIAM) conference and reiterated the Centre's commitment to support automobile firms manufacturing fuel-efficient vehicles and those using alternative fuels. The Indian automobile sector currently generates revenues of $34 billion a year, around 3-4 per cent of the GDP, and this is expected to increase to more than 10 per cent by 2016, he added.

Announcing Maruti's investments plans, Mr O. Suzuki, Chairman and CEO of Suzuki Motor Corporation (SMC), said that the company will make additional investments of Rs 3,000 crore and launch a new small car for the domestic and export markets by 2008.

The company had earlier announced an investment of Rs 6,000 crore, which takes its total investment to Rs 9,000 crore by 2008.

Maruti said that this would be funded largely through internal accruals, and, if necessary, borrowings.

"The new small car will be launched in late 2008. We will manufacture two lakh units a year," Mr Suzuki said.

He also announced that at the Manesar plant, which is under construction, the production capacity of the diesel engines would be scaled to three lakh units a year from one lakh announced earlier. Production will begin in December this year.

The plant will also manufacture the Swift model, the capacity of which would be one lakh units.

Mr Suzuki also said that discussions are also under way to develop another car for Nissan, the plant for which will be set up at the existing facility at Manesar with an additional investment of Rs 2,500 crore.

If the discussions fructify, the investment of this amount will be over and above the investment of Rs 3,000 crore announced today.

Auto export hub

"India has many advantages that will help it become an auto export hub,'' said Mr Jagdish Khattar, Managing Director of Maruti, on the sidelines of the conference.

"Infrastructure is a challenge, but there are cost and other advantages here. All auto manufacturers, including the Tatas and the Mahindras, are facing problems because of lack of facilities at the ports. There is need for a dedicated port for cars in the country."

Meanwhile, Honda Siel Cars India (HSCI), the Indian arm of Japan's Honda Motor Corporation, said that it would set up a second plant in India, which could involve an investment of $200 million over a period of five years.

HSCI said that it is also looking at introducing a small car in the Indian market to expand its product portfolio.

"We are currently expanding the capacity at our Greater Noida facility to one lakh units, following which we will set up a new plant with similar capacity," said the HSCI President and CEO, Mr M. Takedagawa.

He added that the proposed plant would primarily be used for building small cars in India, though the company is currently studying the market for launching the product.

However, Mr Takedagawa said that the new plant "is a little time away."