Maruti Suzuki India (MSIL) acquiring 100 per cent shares of Suzuki Motor Gujarat (SMG) will lead to MSIL making electric vehicles (EVs) rather than Suzuki making it, which was part of the earlier plan, a top official at the company said on Monday.

The company on Monday said it will acquire 100 per cent shares of SMG and the deal is expected to close by March 2024.

Maruti has now a capacity of over two million cars and the company is moving towards production capacity of four million by 2030-31, which will include EVs, the first EV being rolled in 2024-25.

EV manufacturing

“One different thing will be is now the EVs will also be made by MSIL and not by SMG (as earlier part of the plan). The export production will continue as it was from Gujarat, but nothing will change the way production or the marketing is managed,” RC Bhargava, Chairman, MSIL, told reporters.

The technology (for EVs) is all coming from Suzuki (Japan), he said, adding that the benefit is that MSIL employees will actually get involved in manufacturing of EVs and in the longer term (three-four years), “we will acquire much more knowledge and expertise than they would have done other wise”.

Also read: Maruti Suzuki Q1 FY24 profit more than doubles to ₹2,525 crore

He said because of the plan of reducing the carbon footprint, the company is considering various alternative technologies because of which the whole problem of coordinating production, distribution and spare parts were becoming more complex.

SMG was incorporated under the Companies Act at Hansalpur, Ahmedabad, in 2015 and is a wholly-owned subsidiary of Suzuki Motor Corporation (SMC, Japan).

The turnover of SMG in the last financial year ended on March 31, 2023, was ₹31,852.5 crore. Currently, SMC holds 100 per cent equity capital of SMG. The decision was taken in the board meeting and many more board meetings will take place in the coming days to streamline the transition, Bhargava said.

“The transaction shall be completed after taking all the government approvals, as required, under Foreign Exchange Management Act and mode of acquisition, including consideration to be paid to SMC, will be decided in a subsequent board meeting,” he said.

Related party transaction

The acquisition of 100 per cent equity capital by MSIL from SMC is a related party transaction and shall be done according to the prevalent law and regulations, MSIL said.

Bhargava also mentioned that the contract manufacturing agreement (CMA) has a provision, wherein it says that in the event of the contract being terminated, and Maruti buying the shares of SMG, they will be transferred to MSIL at the book value of the last audited balance sheet.

“This provision was actually approved by the minority shareholders at that time and part of this CMA was also approved. So we will go with the according to that. But, if there is any legal requirement if we need to comply, we will certainly comply with all the legal requirements,” he added.

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