Maruti Suzuki, Mahindra Ratcheting Up India Spending

Maruti Suzuki and Mahindra & Mahindra, India’s two biggest manufacturers of light vehicles, are making major investments in product development, manufacturing, marketing and R&D.

Mahindra is spending Rs100 billion ($1.68 billion) over the next three years as part of the automaker’s “long-term vision for the emerging markets for capacity expansion and product development,” President and Executive Director Pawan Goenka says.

Mahindra last year invested an initial Rs30 billion ($496 million) in a new production facility at Chennai and plans to spend another Rs40 billion ($661 million) there and at other facilities by 2015. The government is allotting Mahindra 400 acres (160 ha) of land to attract industries to Chennai instead of Gujarat or Maharashtra.

Products being developed from this plant are a new compact SUV codenamed S101, a new midsize SUV (U301), a global multipurpose vehicle (W202) and a new light-commercial vehicle to replace the Maxximo.

Mahindra already has invested Rs6 billion ($98.7 million) in an R&D facility near Chennai called Mahindra Research Valley. It employs 2,500 people.

The automaker also has poured Rs54.7 billion ($900 million) into its South Korean subsidiary Ssangyong to modernize its SUV portfolio. Ssangyong is developing six new engines to power a new range of SUVs; Goenka says two of them are exclusively designed for Mahindra vehicles and may be launched in 2015. The top 1.6L engine will make its way to Korean markets.

With these products, Mahindra hopes to challenge the likes of the Ford EcoSport, Renault Duster, Nissan Terrano and a new compact SUV expected from Tata.

Maruti Suzuki roughly is matching Mahindra’s 2015 spending plan by earmarking  Rs40.7 billion ($670 million) for new models, marketing innovations, an improved sales infrastructure and upgraded R&D facilities, including building a new test track at Haryana.

The automaker already has launched sales of the Celerio hatchback, is developing a compact SUV and showcased two concept cars, the SX4 S-Cross and Ciaz, at the recent New Delhi auto show. The SX4 S-Cross is likely to come to market later this year.

Maruti Suzuki’s investments are designed in part to blunt the negative publicity over Japanese parent Suzuki’s proposal to set up a wholly owned Suzuki subsidiary in Gujarat. Maruti Suzuki’s plans are independent of  the proposed Suzuki Motors Gujarat venture, in which Suzuki intends to initially invest Rs1 billion ($16 million) and eventually spend Rs30 billion ($480 million).

But that project has been stalled because Suzuki has not received the mandatory 75% approval from Maruti Suzuki minority shareholders, many of whom oppose the plan. Also, it is not known whether the Gujarat state government will allow the transfer of land obtained by Maruti Suzuki at a discounted price to what would be a wholly owned foreign company.