New Delhi: Maruti Suzuki India has begun implementing its vision of nearly doubling total production capacity in about seven years, from the current 2.2 million units annually to 4 million by 2031.
Chairman R C Bhargava told ETAuto today that it will take three to four months to place the proposal for setting up a new manufacturing plant in Gujarat before the company’s board of directors. Earlier this week, the company had announced an investment of INR 35000 crore in setting up a one million unit per annum facility, its fifth, in Gujarat to cater to the increasing demand over the next several years.
“It will take three-four months for land acquisition before the proposal for a new plant in Gujarat goes to the board of directors,” Bhargava said. He said the company had “enough” cash reserves to fund this investment. Besides this new plant, Maruti is also setting up a fourth production line at the existing Suzuki Motor Gujarat Pvt Ltd (SMG) facility in Gujarat, at an investment of Rs 3200 crore, for making electric vehicles.
Maruti’s quest for a sizable increase in manufacturing capacity by the turn of the decade comes amid a steady decrease in the output at its Gurgaon plant, which Bhargava said is already down to about five lakh units and expected to reduce further in the coming years.
The capacity expansion also comes amid analysts’ calls over margin tailwinds. Brokerage Centrum had said in a note last month that Maruti may benefit from “structural margin tailwinds” due to a decline in the prices of precious metals and steel, its strong operating leverage led by fixed cost absorption, richer product mix and consolidation of SMG.
“With renewed focus on fuel efficient models such as CNG/hybrid and strong lineup for SUVs despite short term weakness in the hatchback segment, we expect MSIL is all set to recapture its lost market share. In the past two years, strategic actions taken by MSIL indicate that it has regained substantial market share in UV and such a trend would continue,” the brokerage said.
EV play
Bharagava declined to predict the scale of growth of EVs in India and did not divulge Maruti’s EV market share ambitions. But being a reluctant and rather late entrant into the space,Maruti’s EV play is being keenly watched. The company has set in motion plans to make battery electric vehicles by locally making li-ion cells needed for batteries and is also creating a local ecosystem for other EV parts’ supplies. Then, it is also developing an entire bouquet of other non-ICE vehicles, not just battery electrics. By 2030-31, a large part of Maruti’s total vehicle portfolio will comprise non-fossil fuel powertrains with battery electric vehicles accounting for up to a fifth, followed by strong hybrids and vehicles operating on flex fuels, biofuel etc.
Also, the company’s first electric vehicle will be launched next fiscal – it will be a high-spec vehicle with 550 km range and a 60 Kwh battery. The new Maruti EV has been designed from scratch, unlike some others where an existing ICE technology vehicle has been converted into a battery EV.
Entry level cars
Bhargava says that volume growth in the entry level car segment should come back in about two years as peoples’ incomes are expected to rise. He said that the value proposition of these cars vis-a-vis two wheelers had not changed and there was no reason to believe that people owing two wheelers have stopped aspiring for four wheelers. He also dismissed competition in the form of electric two- wheelers, saying the comfort and safety factors remain identical compared to a four wheeler. The share of entry level cars or small cars has declined to below 30% industry wide after Covid19 and stricter emissions norms impacted affordability of these vehicles.
