Maruti Suzuki Aims to Double Capacity to nearly 2 million unit by 2016
Maruti Suzuki Aims to Double Capacity to nearly 2 million unit by 2016
Maruti Suzuki India Ltd. aims to double its annual production capacity to two million vehicles in six years to help the country’s biggest car maker by sales retain leadership amid mounting competition from Hyundai Motor Co., Volkswagen AG, Toyota Motor Corp. and General Motors Co.
Maruti, majority owned by Japan’s Suzuki Motor Corp., wants to boost capacity to maintain its hold on more than half of the fast-growing car and SUV sales in the country, Chairman R.C. Bhargava said at a meeting with auto parts suppliers in Hong Kong last week.
The meeting, themed ‘Beyond A Million’, was to help evolve growth strategies and make sure suppliers were prepared to double their output, Mr. Bhargava told Dow Jones Newswires over the weekend when asked for details about it.
India and China were among a handful of markets in which sales remained robust last year despite a global economic downturn, and that forced overseas auto majors to take note. According to the Society of Indian Automobile Manufacturers, in the year to March 2010, 1.95 million cars and SUVs were sold in the country.
“All economic indicators are there and if the market doubles in size, then we would obviously want to maintain our lead with an over 50% market share,” said Mr. Bhargava.
Mr. Bhargava said car and SUV annual sales are expected to surge to 3.6 million to 4 million units by the financial year ending March 2016.
The Indian automobile market has grown at an average rate of 14% annually for the past 15 years now. Even if we grow at 12% for the next six years, the market should double in volume, he said.
Maruti will have to double its production capacity if all economic indicators remained positive and the local automobile market continued to post robust gains, he added.
“There is no reason for us to believe that we won’t achieve this conservative growth estimate,” he said.
Rising disposable incomes, lower borrowing costs and a robust economy have also fueled demand for personal mobility in India where small cars comprise about 60% of domestic car and SUV sales last year.
More than half of these small car sales were Maruti vehicles.
Demand for small cars in India has prompted global car makers Volkswagen, Toyota, Nissan Motor Co., Renault SA, GM and Ford Motor Co. to either start selling small cars here or announce plans to do so soon.
“Over fiscal years 2010-2012, we expect the Indian car market to resume growth at the trend rate of 12%-15%, driven by low penetration levels, resumption of financing, and a decline of 10% in the overall cost of ownership,” Jamshed Dadabhoy, a Mumbai-based analyst at Citigroup said in a recent note.
“Maruti is best positioned to benefit from this growth in our view given its dominance in the domestic car market.”
Maruti reached an annual capacity of one million cars last year, making it the only car maker in India to do so. The company is now investing an additional 42 billion rupees ($923 million) to build a new vehicle assembly line and to expand its research and development operations.
The new line will raise Maruti’s annual vehicle output by 25% to 1.25 million units by April 2012. It is also upgrading one of its two factories in the northern Haryana state to manufacture more vehicles with the existing capacity.
In 2007, Maruti had outlined an investment of INR90 billion over a three-year period to raise capacity, build a new engine plant and develop new vehicle models.
“A new assembly line takes 18-24 months to start and we also have the money to do it,” Mr. Bhargava said. “It’s just a matter of time. If we consider that the growth and the volumes are sustainable, it won’t take much time to add capacity.”
source: Wall street journal
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