After months of labor strife, the head of India’s largest auto maker sees better times ahead.

“Labor peace has been established and it was a good learning experience for both sides,” says Maruti Suzuki India Chairman R.C. Bhargava.

Four strikes between June and October at Maruti’s Manesar plant slashed production by 83,000 units, costing the auto maker $510 million in sales income.

Now, Bhrargava tells WardsAuto in an exclusive interview, “The Manesar workers realize that striking brought them no benefits and cost them substantial losses.” He hopes a grievance committee formed to address labor-management issues will help keep the peace.

Near-full production has resumed at the 4-year-old plant, but Maruti managers face other challenges these days as economic growth slows in India and a combination of inflation, rising interest rates and higher fuel prices buffet passenger-vehicle sales.

“For the Indian auto industry, this is not going to be a very good year, with sales up only 2% to 5% compared to earlier estimates of 15% to 16%,” Bhargava says. “Maruti sales may not reach the volumes of last year, when they increased 30% to 1.27 million units.”

During the recent festival season when incentives were at their peak, the average discount offered by Maruti was Rs13,500 ($275) per vehicle, up sharply from Rs8,500 ($173) in the previous April-July quarter. Dealers chipped in additional discounts and incentives.

Yet Bhargava is unruffled by the ups and downs in India’s turbulent automotive industry – upbeat about where Maruti Suzuki is headed, ready to defend its place as India’s No.1 auto maker and preparing for an even bigger and broader role at home and abroad.

A second line soon will begin operating at Manesar, raising daily output to 2,000 units. A third line due to start next year will produce another 1,000 per day, raising Maruti’s total capacity to 1.7 million units, including 850,000 at the main Gurgaon plant.

And more is coming.

The auto maker is planning to expand into Gujarat in Western India to help serve the western and southern markets better, and to save on the logistical cost of exports by moving closer to a seaport.

Maruti is buying 1,000 acres (405 ha) of land there for a new plant, and news reports indicate production could begin as early as 2015 with annual capacity of about 1 million units. A 3-month strike earlier this year at a General Motors facility in Gujarat has not dissuaded the U.S. auto maker from expanding operations there.

“No areas in India are totally clear of labor problems, but Gujarat is probably among the better ones,” Bhargava says.

Operations at the seven Maruti plants and those of 100 suppliers in Northern India have been marred by 17 strikes and other labor unrest in the past five years as Indian workers demand a larger share of their employers’ profits.

Yet competition is quickening. “Many companies have come into India and are nibbling away at the market, so it has become more difficult for everybody,” he says.

“Maruti is big in the B-segment, still the biggest and fastest-growing part of the Indian market. Our next-generation Swift compact introduced in August attracted 100,000 new bookings and demand continues to exceed supply. And the best-selling car in India is our 800cc Alto.”

In 2010, with passenger-car sales multiplying more than 2-½ times in six years to 2.18 million units, India was the world’s fastest-growing major automotive market after China. Over two dozen producers, mostly foreigners, now are now fighting for a piece of the market.

Maruti’s share of light-vehicle sales through July was 32.4% year-over-year, WardsAuto data shows, but had fallen to 30.7% by the end of October as labor troubles subsided. Bhargava expects the auto maker’s India share will rebound to 40% in the next fiscal year.

“So far, no Japanese, U.S. or European makers pose strong competitive threats,” Bhargava says. “Even the Japanese have a long way to go in building their capacity, sales outlets and service networks in India.”

Nor does he see a Chinese threat materializing anytime soon, despite the recent decision of General Motors India, now half-owned by Shanghai Automotive Industry Corp., to assemble and sell Wuling minivans and small trucks in India beginning in third-quarter 2012.

“I’m not sure what impact they will have in the next 10 years. But companies coming so late into a market are often disappointed. It won’t be easy for any newcomer to penetrate an established market like India’s,” Bhargava points out.

However slim the odds of success, the attraction is obvious.

India is a subcontinent of 1.26 million sq.-mi. (3.26 million sq.-km) with a population of more than 1.18 billion people and growing 1.4% a year.

Prosperity has begun to spread and the loosely defined middle class now may number about 300 million people, yet car ownership is only 11 to 12 per 1,000 people. So despite the current down year, Bhargava remains enthusiastic about the future of India’s auto industry and Maruti’s position in it.

“We are still the lowest-cost auto manufacturer in India, with labor costs at least 4% below anybody else,” he says. “We have the advantage of volume, producing about 1.3 million vehicles a year and more than twice the market share of our closest competitor, and a superior sales and after-sales network.”

Maruti has 1,000 sales outlets in 727 cities and towns nationwide and aims to double the number of outlets by March 31, 2015. The focus is on penetrating Tier 2 and Tier 3 cities, with rural sales already accounting for more than 22% of total domestic deliveries.

Bhargava emphasizes the company’s biggest advantage in the future will be a world-class research-and-development center and a deepening relationship with the parent company.

In recent years, Suzuki, which owns 54.2% of Maruti, has been busily broadening the operations of its Indian subsidiary.

For example, a Maruti engineering team already has worked with Japanese counterparts on world strategic models ,including the Swift, SX4 and A-Star, as well as India-specific models such as the Estilo and Dzire. Suzuki combined the teams to avoid duplication of effort and shorten the development time of several new global models.

India is to be the production hub as well for Suzuki’s small-car exports worldwide, “not just to emerging markets but including Europe and even shipments of some completely built-up models back to Japan,” Bhargava says. “We will complement the capabilities of Suzuki in Japan, but it’s too early to talk about volume.”

This combination is unlikely to involve electric vehicles, for which he sees little demand in India because the country is perennially short of electricity and few people have a garage or other convenient place to charge batteries.

Maruti’s $2.3 billion expansion plan begun in 2007 is on track, and an additional $244 million to $306 million is budgeted for a new research and development center scheduled to open within the next two to three years.

The main obstacle likely to hobble even-livelier growth of a healthy Indian economy and auto industry can be summed up, as usual, in one word: infrastructure. The lack of adequate power generation, roads, railroads, ports, airports and other critical economic underpinnings has undermined development in India for decades, and the outlook for significant improvements is still dim.

“There is little evidence that infrastructure problems will finally be tackled. There is some movement in the private sector, but I am skeptical about the government’s ability to implement infrastructure projects,” Bhagava says.

Yet he has reasons to be encouraged about the future.

“The Indian automotive market has been averaging about 15% annual compound growth in recent years and, long term, we expect this average to continue. So we estimate total sales will be between 4.5 million and 5 million passenger vehicles in 2015-2016 and between 9 (million) and 10 million by about 2020-2021.”

And if all goes according to plan, Maruti Suzuki will have about 40% of these sales.