Maruti Suzuki sees full output at Manesar soon

India's largest passenger car maker Maruti Suzuki expects vehicle production at its Manesar plant, hit by labour violence last month, will be fully ramped up soon.

Maruti had shut the Manesar plant, following a workers unrest that left a general manager dead and 96 supervisors and managers injured, many having fractures. Production resumed on August 21, under heavy security. The company restarted operations at Manesar producing 100 vehicles a day. Currently it is producing 400-500 units per day, Shashank Srivastava, Maruti Suzuki's executive director-international operations, told CNBC-TV18 on Friday. Before the strike, the company used to produce around 1,700 vehicles per day at Manesar. The Manesar plant is extremely important for Maruti Suzuki as it produces the hatchback Swift and DZire compact sedan, both among the top selling cars in the industry. Maruti Suzuki also produces the small car A-Star at Manesar, which is also exported in several global markets. Srivastava said there was some blip in exports due to the plant closure last month, but the company still maintains its earlier target to ship 1.25 lakh vehicles this financial year. Maruti's exports to Europe were hit following the end of the scrappage incentives a couple of years ago, and there continues to be a pressure on sales amid the debt crisis in the Euro zone. However, Srivastava said the company was seeing good growth in exports to Africa and Latin America. In the domestic market, meanwhile, he expects pressure on petrol vehicles to continue. Sales of petrol vehicles have been hit over the last one year, due to a sharp rise in petrol prices and expensive loans. There are reports that oil marketing companies will announce another round of petrol price hike later on Friday. Sales of Maruti's petrol powered 800, A-Star, Alto and WagonR were down 41% to 22,062 units in August. Companies have been offering discounts on petrol cars to boost demand. Srivastava said the discounts are likely to stay at 4.5-5% of ex-showroom price. While petrol car sales have slowed, demand for diesel vehicles has jumped. He said, diesel vehicles now account for 55-56% of the total market, compared with 40% a year ago. Maruti too has seen strong demand for the diesel variants of Swift, DZire and the new Ertiga MUV, which was launched in April. Below is the edited transcript of his interview with CNBC-TV18's Udayan Mukherjee. Q: Can you just take us through the pace at which the ramp up is happening at Manesar? By when do you expect to hit peak production again? A: Last Tuesday, we started the production again in Manesar. We have started one shift operations. We will quickly ramp it up to the normal levels. Maybe it will take a little bit of time. I don’t really know the exact time schedule, but the start has been pretty good. _PAGEBREAK_ Q: Right now you are going at what, 400-500 cars a day? A: Yes, around that figure. That is right. Q: Do you think you should be back to speed in about a couple of months time with no further glitches from here? A: Hopefully yes. Q: What is happening with your petrol brands now? Are inventory levels still continuing to be very high because of the distorted market that we are in? A: Yes. I think if you have seen the trend in the market over the last couple of years actually, starting with that large difference in the petrol and diesel prices, which got build up in June 2010, there has been a massive shift towards diesel. This year, so far, diesel has been almost 55-56% of the market as against 40% at this time of the year last year. I think this trend continues. Alternate fuels like CNG etc are doing much better. That obviously puts a pressure on petrol vehicles because the differential price in the fuel has been a problem. Consequently, all the other problems related to it continue. Q: What kind of discounting do you have to resort to sell some of the petrol products now? A: I think it varies geographically from place to place and from model to model. It depends on what inventories dealers have. I think to put a particular figure at a particular model may not be correct. But roughly there is some research that shows that roughly about 4.5%-5% of the ex-showroom price is the current discount. Q: Today is the big global day with people talking about good news from Europe. Are you seeing any relief in that region on the export front or they continue to be sluggish? A: In the exports front, we have plans to do roughly about 125,000 or so. We were right on course, except last month, when there was a disruption in production. We had a little bit of short fall because of the lack of supplies. Europe is a problem. Maruti Suzuki exports strategy is clear that we want to push in as much as we can into the non European markets. That is what we have done. If you see the last couple of years, we have developed markets in ASEAN as well as Latin America and Africa. Those markets still continue to do very well. There is a good jump in Africa as also in Latin America. Our strategy of focusing on the non-Euro markets has been good. Hopefully, at some point of time, the EU markets will also bounce back. Q: Any numbers you can work with for the exports in FY13? A: We are looking at somewhere around 125,000 or so. That is the number which we are looking at for this financial year ’12-13. So far, we have done around just under 50,000. We were right on course till July, but there is a little bit of blip because of the lack of production in A-Star and also Dzire that we have launched in many of the international markets like Africa, Chile and some of the other Asian countries. That was the small gap that we have had in the achievement so far till August. Q: What is your Diwali strategy in the new launches that are lined up including the 800CC? A; I think it will be difficult for me to talk about future strategies, especially new launches.