Will increase capacity 46% to 17.5 lakh units.

Our Bureau

New Delhi, Sept. 7

To capitalise on the rapid growth of the Indian auto industry, Maruti Suzuki India Ltd (MSIL) announced on Tuesday an investment of ¥35 billion, or Rs 1,925 crore for setting up its third plant at Manesar. This new production line – Maruti's sixth overall would have 2.5 lakh units annual capacity.

With the new plant, the car market leader hopes to increase its total capacity 46 per cent to 17.5 lakh units a year. Facing a major capacity constraint and huge demand for its products, MSIL currently manufactures 12 lakh units a year. However, the installed combined annual capacity across the existing Gurgaon and Manesar facilities is around 10 lakh units.

Addressing a shareholders' meeting, Mr Osamu Suzuki, Chairman and CEO, Suzuki Motor Corporation (SMC), said that the company had earlier not correctly estimated the current pace of growth of the Indian car industry. Japan-based SMC owns a 54.2 per cent stake in MSIL.

Mr R.C. Bhargava, Chairman, MSIL, told Business Line, “Now that the in-principle approval has been given by Mr Suzuki, the investment will have to be approved by the board at its meeting in October. Some work will already start now though.”

Manesar Expansion

He added that the Rs 1,700-crore ongoing expansion project for a second line at the existing Manesar plant will be accelerated by about six months. It was earlier expected to be operational only by April 2012. This expansion project will be completed before the new third plant opens at Manesar and will provide Maruti a similar annual capacity of 2.5 lakh units.

“We are trying to start the assembly line in the expansion of Manesar by September 2011. Since there is so much demand, we are trying to advance it as much as we can,” he said.

As part of its plan to increase production capacity, Maruti is also upgrading and modernising its Gurgaon facility. This is expected to help by adding further capacity and in meeting the 17.5 lakh production target of the next few years. No investment for this was, however, announced.

“Out of the three plants (production lines) at Gurgaon, the machinery at the first and the oldest plant is being scrapped and modernised,” said a company official.

The Indian auto market – Asia's third largest and the second fastest growing globally – accounted for sales of 15.26 lakh units of passenger cars in 2009-10, marking a growth of 25 per cent.

Of the total, Maruti's share was around 50 per cent with sales of 7.65 lakh units. Industry body SIAM predicts annual car demand to grow to 30 lakh units by 2015.

Maruti Suzuki's Rs 5 shares closed nearly one per cent up on the NSE on Tuesday at Rs 1,314.90.


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(This article was published in the Business Line print edition dated September 8, 2010)
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