Maruti Suzuki to invest Rs 45,000 crore to ramp up production to 4 million units by FY31

 The progress should be viewed in the context of the company taking 40 years to build a comparable number of automobiles in the past.  

By Shruti Mishra, Shahkar Abidi and Radhika Dave calendar 29 Aug 2023 Views icon10155 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp
Maruti Suzuki to invest Rs 45,000 crore to ramp up production to 4 million units by FY31

Maruti Suzuki, the country's largest vehicle manufacturer, intends to utilise its current cash reserves of Rs 45,000 crore, in a bid to achieve a cumulative production of 4 million cars by FY2030-31. The company which has launched its third phase of expansion, aims to add another two million cars in the next eight years, the Chairman RC Bhargava said in an Annual General Meeting (AGM). 

The company also hopes to more than double its revenue during that time, Bhargava continued. 

The progress should be viewed in the context of the company taking 40 years to build a comparable number of automobiles in the past.
 
Bhargava, during his opening remarks, stated that the breakneck pace of advancement projected would be impossible to achieve without reorganising the company. He says that owning the parent company's production site in Gujarat is a significant step in that direction. It will result in 1.8% equity for Suzuki Corporation, which Bhargava claims is minuscule compared to the benefits Maruti will be getting out of it.
 
Elaborating on the need for Maruti to acquire Suzuki Corporation's Gujarat plant, the top executive said that way back in 2013 when the plan of contract manufacturing was first proposed, it was apparently met with resistance from some of the stakeholders. Their contention was that Maruti could set up the plant on its own, with the company holding Rs 13,000 crore in cash reserves at that time. Maruti's management, however, managed to convince the stakeholders, and the plant began operations in 2015.
 
Bhargava emphasised that Maruti's plans to hold the cash paid off, as its cash reserves ballooned to nearly Rs 45,000 crore at present. This has led to the company's price-earnings ratio climbing to about 30, which stands as the best in the automotive world globally, behind only Elon Musk's Tesla. The p/e ratio, or price-to-earnings ratio, is a measure of a stock's valuation.
 
A higher p/e ratio indicates that investors are willing to pay more for each dollar of earnings, while a lower p/e ratio suggests that the stock is undervalued.
 
According to Bhargava, the company's third phase of growth, dubbed 3.0, will also include aggressively investing in upcoming technologies such as electric vehicles (EV), CNG, ethanol, CBG, and others as it moves globally towards sustainability and higher safety standards similar to its global peers.
 
"The stronger Maruti becomes, the stronger Suzuki becomes," Bhargava further added. 

Also read: Maruti Suzuki has highest PE ratio in the world after Tesla 

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