Maruti Suzuki's Gujarat plant to go on stream in early 2017

Maruti Suzuki's upcoming Gujarat plant will go on stream in early 2017.

"It was originally planned to be ready by May 2017. But it will now be ready a couple of months earlier as we need additional capacity as soon as possible," RC Bhargava, chairman, Maruti Suzuki India, told mediapersons at the announcement of the company's results today in New Delhi.

Both the existing Gurgaon and Manesar plants will reach optimum utilisation next year that will necessitate further capacity to be in place for manufacturing the proposed new models till 2020.

At present both the plants have used about 95 percent of their full capacity of 1.5 million units annually running two shifts.  "We are thinking of adding a third shift based on market demand," added RS Kalsi, executive director sales and marketing.

Two new models – the Carry LCV and a compact SUV – are slated for launch in Q4 FY'16.

Interestingly, the compact SUV will be the first of the new models with which Maruti's agreement with parent Suzuki for royalty payments will undergo a change. Till now MSIL's average royalty to its parent company ranged between 5.5-6 percent for buying technology from Suzuki and was paid in yen. Now the forthcoming agreement for paying royalty for the compact SUV and is yet to be inked will be paid in Indian rupees and will be less than 4 percent of it with the maximum payout for each of the new models being 5 percent of the rupee price.

The royalty rates for the existing models will be guided by the existing agreements with Suzuki and will not be changed, said Bhargava. Which effectively means that for new models considerable work will be done in India to meet the requirements of the Indian market. Hence the royalty payment to Suzuki will be lower. Earlier due to the fluctuation of the yen the rupee also fluctuated.