Maruti undertaking feasibility study to set up assembly plant in Sri Lanka

New Delhi, December 24, 2013: Maruti Suzuki India is undertaking a feasibility study for setting up an assembly facility in Sri Lanka that will provide a good potential market for Maruti cars. At present, some of its exports are headed to this market. A few sites around Colombo are currently being investigated for economic viability, according to R C Bhargava, chairman, who told Autocar Professional that certain issues are involved that had to be streamlined.

“These relate to taxation and workers and have to be first sorted out with the Sri Lankan government before the plan for setting up the assembly plant can be finalised,” he said.

Other export markets that will be further strengthened are Africa and Middle East that are developing markets and offer a good opportunity for selling Indian cars. “We are developing the sales network in these countries and currently export 10,000 units monthly to Europe and non-European markets. In future, a big growth area will be Africa,” said Kenichi Ayukawa, managing director and CEO.

The carmaker will meanwhile continue to tap growth in the rural markets which account for 30 percent of the total sales. Bhargava said retail sales of Maruti grew 18 percent in the rural markets during April-November 2013 contributing 200,000 units of the total sales while sales in the urban areas were down 5-6 percent. As a result, overall retail sales of Maruti were 1 percent higher than the same period last fiscal. During this period, industry sales excluding that of Maruti declined by 9 percent. In terms of exports, Maruti expects to close FY’14 marginally short of its target of 120,000 units. This is primarily due to uncertainties in the overseas markets as some countries undertake changes in policies and economies that will impact exports from India. For instance, Algeria that was a big market for Maruti has made some changes in regulations that will act as a deterrent.

In the remaining 4 months of the current fiscal, the carmaker is bullish of selling 277,000 cars and Bhargava expressed optimism that sales for the financial year may not be below that of last year but a little higher.

The industry meanwhile is showing no signs of revival or pick-up in demand and the expectation is that the rest of the industry excluding Maruti will close 2013-14 down by around 5 percent. “We are waiting for the new government, post elections to revive manufacturing and the economy as growth in the automotive sector is linked to the growth of the economy. We don’t expect much to happen till elections. This will be a no action period,” he says.

Hence, the company’s thrust and main plank for growth will be the rural markets which are still largely under-penetrated. Neither is money a constraint here. At present, Maruti has 700 rural E-outlets along with workshops and 650 mobile workshops to meet customer requirements within close proximity. Locals are harnessed to cater to the local needs.

“We have reached 60,000 villages compared to 44,000 villages last year. The target is to penetrate 100,000 villages by March 2014,” said Mayank Pareek, COO –sales and marketing. Total villages in India are around 651,000. Last year, Maruti Suzuki had touched 92 percent of the tehsils and is now tapping the villages.

In the meantime, diesel sales continue their downward spiral from the earlier 58 percent of the total passenger vehicles market to the current 54 percent. Bhargava says SUVs that at one time were the main growth driver had slipped by 3.5 percent this year, the exception being sales of the newly launched Ford EcoSport. Sales of the Renault Duster that had initially witnessed a robust market response is now also on the decline.

The company’s much-touted Gujarat plant has been put on the backburner for the time being though Bhargava says that the land has been acquired, the boundary wall has been built and basic infrastructure like water and other things are being put into place. However, development work on Maruti’s first LCV (codename Y9T) that was earlier expected to roll out from the Gujarat plant is on track and will roll out from either the Gurgaon or Manesar plants.

Ayukawa agreed that work on the 800cc diesel engine for the LCV is underway and does not rule out that Maruti is looking at a 1.5-litre diesel engine as well and is exploring options of either procuring it or developing it. He says that despite the launch of the Honda Amaze, volumes of the Dzire small saloon are increasing but the Amaze is a very successful model. “We have to evaluate that product as we are competitors and evaluate which point is better than our product. We have to compare the two and implement the information to our next model.”

Maruti has plans to launch a number of new models in the next calendar year and Ayukawa says that the carmaker’s focus will remain on the people’s cars that are affordable as there are other carmakers to meet the requirements of more luxury models.

The company’s upcoming R&D centre at Rohtak in Haryana is on track and will be completed by 2016 while the test track will be operational by next year.

On media reports of Suzuki looking at upping its stake in Maruti Suzuki, Bhargava said in the future there could be a possibility. At the moment Suzuki had no such plans.

SHOBHA MATHUR