Suzuki’s Stand-Alone Indian Plant Gets Green Light

MUMBAI – Maruti Suzuki minority shareholders approve a proposal by the auto-manufacturing joint venture to purchase cars built by a wholly owned Suzuki subsidiary in Gujarat state.

The Japanese automaker is expected to invest Rs185 billion ($2.8 billion) in the Suzuki Motor Gujarat plant, which will comprise six separate manufacturing lines each with capacity of 250,000 units. The first line is to be commissioned in early 2017.

The agreement was approved by 90% of the minority shareholders who voted, Maruti Suzuki Chairman R C Bhargava says. Unconfirmed reports say more than 45% of shareholders  did not participate in the voting.

Under the agreement Suzuki Motor Gujarat (SMG) will build cars for Maruti Suzuki branded simply with the “S” logo used on other Suzuki vehicles. 

Maruti Suzuki-branded cars and utility vehicles built to the JV’s specifications and sell them at cost. The new company also will reimburse Maruti Suzuki for its Rs3.5 billion ($5.3 million) investment in the land on which the plant is being built.

The deal provides Maruti Suzuki, India’s No.1 automaker, with urgently needed capacity. Its light-vehicle sales from January through October were up 11.9% from like-2014, WardsAuto data shows, and the nearly 1.1 million vehicles produced during that period at its Gurgaon and Manesar plants pushed the JV closer to its maximum capacity of 1.5 million units.

Maruti Suzuki will depend on Suzuki for the platforms and powertrains of cars to be built by SMG, and the Japanese automaker will take the lead in development of small hybrid cars and improving safety and emissions.

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Otherwise, Maruti Suzuki said in a letter distributed to minority shareholders during the voting, “Maruti will have full control over what happens in Gujarat, and all the profits from the Gujarat production will come to Maruti.”

With Suzuki investing directly in the Gujarat plant, Maruti Suzuki will use Rs80 billion-Rs100 billion ($12 billion-$15.1 billion) in surplus funds to increase R&D spending and double its number of dealerships by 2018 to keep pace with the production increase resulting from the new Gujarat operation.​