Maruti Suzuki Chairman Bhargava OK With Plant Delay
Executive Summary
Delaying the plant will allow Maruti Suzuki to draw on its cash reserves and invest in marketing and sales, expanding the sales network and ‟making the right models,” Bhargava said during the automaker’s September general meeting.
MUMBAI – To Maruti Suzuki Chairman R C Bhargava, a 1-year postponement of construction of an assembly plant in Gujarat state that could delay the start of production until 2017 is a ‟win-win” for India’s largest automaker.
Maruti Suzuki since early this year has been awaiting minority-shareholders approval for handing over the site of the proposed plant to Suzuki Motor Gujarat, a new, wholly owned subsidiary of Japanese parent Suzuki. The 250,000-unit-capacity factory is to be built and operated by Suzuki Gujarat, while Maruti Suzuki will handle distribution and sales.
Delaying the plant will enable Maruti Suzuki to devote fewer resources to a sluggish Indian car market and instead draw on its cash reserves of about Rs80 billion ($1.35 billion) for ‟investing in marketing and sales, expanding (the sales) network and making the right models,” Bhargava said during the automaker’s annual general meeting in September.
Additionally, the postponement should bring existing plants at Manesar and Gurgaon to near-full production capacity, although supply problems could result from the delay.
Maruti Suzuki, meanwhile, has pressed ahead with product development. It recently launched the Alto K10, an entry-level version of the Alto 800, India’s best-selling car. The K10 has a 1.0L 3-cyl. engine making 67 hp and features automatic manual transmission and electronically controlled throttle.
Maruti Suzuki had seven of the country’s 11 best-selling models in October – its entire range is 13 models in 75 variants. Most are small cars, including the spacious, fuel-efficient Celerio, base-priced at Rs430,000 ($7,200). The automaker hasn’t fared as well in the midsize segment, but it is easing out the SX4 in favor of the newly launched Ciaz, which shot from 37th in the September sales rankings to ninth in October.
The automaker sees another opportunity for a breakthrough with low-cost small hybrid vehicles with engines ranging from 0.8L to 1.3L engines. Suzuki is conducting the research in Japan.
Maruti Suzuki also is expanding its diesel-engine production capacity, despite fluctuating fuel prices that have made it difficult to anticipate demand for diesel-powered cars, SUVs and light-commercial vehicles.
