Maruti's Big Capacity Jump

The company’s plant in Gurgaon currently churns out 850,000 units and its Manesar facility produces 350,000 cars annually. Both these plants are operating at over 100 percent capacity utilisation. The new capacity will also give Maruti Suzuki to explore new opportunities for contract manufacturing, if it has any spare capacity. MSIL and Nissan haven’t taken a call yet on the future of the existing manufacturing contract between them.

With the latest announcement, Maruti Suzuki’s cumulative investment during 2010-2013 will cross Rs 6,000 crore, which includes a Rs 2,500 crore engine plant and R&D centre. The company’s multiple investments are a reflection of its strategy to be future ready, even though it finds it difficult to predict. R C Bhargava, chairman, Maruti Suzuki, told Autocar Professional that he has “given up the business of forecasting”. He says, “the Indian market is so unpredictable. What probably one needs to have is much more flexibility and be nimble enough to adjust to changing market scenarios.” With a growing number of competitors, the new initiatives are part of Maruti Suzuki’s strategy to protect its turf. Bhargava says, “Competition of course is becoming more intense as more and more people are entering this segment (of compact cars). Earlier many people came up to the A3 segment. It means (for Maruti) doing the same thing better perhaps. That means making continuous improvement in the value for money which we give to our customers.”

Even with the addition of the new plants, Maruti Suzuki’s focus will continue to be on small cars. It hasn’t really made a mark in premium cars. It doesn’t see a significant market there as well. The Kizashi, which will compete with the likes of the Accord and the Camry, will be more of a brand showcase than any major business volume. Bhargava says, “I don’t think Kizashi will sell in very large numbers. It’s going to come in as an imported product. In fact I don’t see large volumes for anybody in that segment. If you look at all the other models, nobody really has any big volume.”

So, the big production volume growth of over 40 percent that Maruti Suzuki is planning to set up will be dedicated for its bread-and-butter compact cars. The company has indicated that it will expand its current portfolio of 12 models. And the expansion will happen over different segments. As for the sales growth of the company, Bhargava prefers to be realistic when he says “the rate of growth (of 27 percent during April-August) is exceptionally high. I doubt we can average growth of 27 percent in the remaining seven months.” Even then with the projected production volume for this year, Maruti Suzuki is all set to overtake its parent Suzuki’s production in its home market Japan. In the coming years, India is only going to be increasingly important for the Japanese car major