In an initiative aimed at consolidating its status as the biggest carmaker in India and improving its position as an exporter, Maruti Udyog (MUL) has announced investments worth Rs 9,000 crore over the next four years. This includes Rs 2,500 crore each towards the diesel engine plant in Manesar and a plant to produce Nissan cars also at Manesar, and Rs 4,000 crore towards expansion and upgradation of the Gurgaon facility.
Making these announcements, Osamu Suzuki, chairman, Suzuki Motor (SMC), hinted that an additional Rs 2,500 crore would need to be invested by Suzuki and Nissan if a proposal to jointly produce a separate small car goes through.
In Yokohama, Japan, Takeshi Isayama, vice chairman, Nissan, told journalists that negotiations were still on with Suzuki and a decision would be taken “within a month or two”. The two companies had announced in June that Maruti would produce cars for Nissan on a contractual basis. This plant is coming up at Manesar. The other car project, if it materialises, could be located in a special economic zone (SEZ), near one of the major ports to facilitare export.
It is obvious that Nissan has chosen Maruti because of its competence in building small cars, and its ability to control cost. Should this partnership work out, the next step could be a stronger alliance between the two at a global level. Carlos Ghosn, chief executive, Renault and Nissan, has stated that the two companies' alliance could be opened to other partners. "Under the right conditions, the benefits of alliance can be extended and significant value can be created for all partners," he said at the launch of a new crossover vehicle from Nissan.
Osamu Suzuki said that he had apprised government officials of the need to have adequate port infrastructure in place. “The worrying point is we do not have a port to handle such big volumes. We have container terminals, but dedicated ports are not there for vehicle exports,” he said.
News reports indicate that Nissan and Suzuki have submitted a long wish list, including a 10-year corporate tax holiday, duty-free imports, a VAT holiday and stamp duty exemption for the Rs 2,500 crore plant they plan to jointly set up. In addition to the tax write-offs, the companies have sought cheaper electricity, gas and water. They also want a stable industrial water supply and the laying of a liquefied natural gas pipeline as soon as possible. The other demands made to the central and state governments include an upgrade of transport infrastructure from their plant to ports, streamlined border inspection, abolition of traffic restrictions on heavy vehicles in cities and development of ports.
Coming to Maruti’s diesel engine plant now under construction at Manesar, production would begin by December 2006. In the first year one lakh diesel engines will be produced. This plant has an installed capacity of 300,000 Multijet engines, licensed from Fiat. Of these, half are intended for use in the domestic market with the Swift being a major recipient. Some engines could even go to GM India. The rest are meant for export, mainly to Europe.
Osamu Suzuki said that with crude prices being what they are, there is a chance that diesel could become the preferred fuel choice in the future. This plant, therefore, would have a major role to play in the fortunes of the company in the coming years. He also said that a new car plant was being constructed which will manufacture 100,000 Swifts per annum. After this he said there are also plans to manufacture a small car for exports.
He added that Maruti would set up a plant to manufacture and sell one lakh small cars for the European markets. With these increased capacities, MUL's exports are expected to touch 1.5 lakh to 2 lakh units per annum. “This will reach 4 lakh units per annum if plans with Nissan is finalised.This will be the big jump in exports,” he said.