In low-demand era, Maruti has a different problem: capacity

Auto sales may have been sluggish for the industry, thanks to the prolonged economic slowdown, with volumes being about flat for two consecutive calendar years.But this has not been a problem for market leader Maruti Suzuki, which actually saw its market share grow significantly over those years.In an interview with CNBC-TV18, Maruti Suzuki Chairman RC Bhargava said the company was confident of achieving double-digit growth going forward.The high demand for the company's products reflects in the fact that it has been working at full capacity, and faces a problem of expansion.

"We have reached what was supposed to be capacity in Gurgaon and Manesar and now we have to adopt some some ways by which we can produce maybe 150,000-160,000 units more than planned," he said.Below is the verbatim transcript of RC Bharagava’s interview with Ronojoy Banerjee on CNBC-TV18.Q: Do you think that you will achieve double-digit growth?A: I think demand will enable us to do double-digit growth. The challenge is going to be on keeping supply going, because in Gurgaon and Manesar we have reached what was supposed to be its capacity and now we have to adopt some experience some ways by which we can produce maybe 150,000-160,000 units or some figure like that more than the planned capacity. Our Gurgaon plant has a limitation because it is in the middle of habitation, dense habitation, so you can’t increase production much there. It would have been easier to increase production in Gurgaon than in Manesar. So that’s the challenge but I think our people will find some ways of getting close to the numbers we want.Q: So production is one challenge, but in terms of sheer headwinds and the uncertainties surrounding the auto industry, especially, with this diesel dagger hanging over every original equipment maker (OEM) head, that is why I am saying like purely in terms of sentiments, how do you intent to achieve that target?A: The sentiment has overall reduced diesel sales of the industry by 3-4 percent this year. Maruti has not been affected so far and we still don’t know what the Supreme Court’s orders will be whether it will apply to all diesel cars, some diesel cars, bigger diesel cars, we don’t know. Hopefully, the Supreme Court will also look at all the arguments and data which was submitted because the industry viewpoint and here I am talking of the industry as a whole not Maruti, our viewpoint is that the pollution from diesel cars in spite of what many people might say is very, very small out of the total pollution which exists in Delhi and benefits of cars in term of employment and technology is much higher.Q: So are you reviewing your diesel plans owing to this uncertainty?A: No, we are not, we are continuing with our diesel plans.Q: You don’t want to give an estimate and guidance of your profitability, but considering the fact that advertisement expense is going to go up. Do you feel that at least profitability in the short term may be under pressure?A: No, I don’t think advertising will go up beyond what we have done this year. We will be remaining just about the same level and this won’t be a factor in profitability.