Maruti Suzuki India informed stock exchanges on July 31 that its board has approved the termination of the contract manufacturing agreement with Suzuki Motor Gujarat Private Limited (SMG).
Additionally, Maruti said its board has decided to exercise the option to acquire the shares of SMG from Japan's Suzuki Motor Corporation (SMC), subject to all legal and regulatory compliances including minority shareholders’ approval.
Suzuki Motor Gujarat Private Limited (SMG) with its its registered office in Ahmedabad, Gujarat, is a wholly-owned subsidiary of Suzuki Motor Corporation (SMC), which is a body corporate incorporated in Japan.
The transaction shall be completed after taking all the Government approvals, as required, under Foreign Exchange Management Act, before March 31, 2024, Maruti Suzuki India said. The mode of acquisition including consideration to be paid to SMC shall be decided in a subsequent Board Meeting, it said.
Presently, SMC holds 100 percent equity capital of SMG. Maruti Suzuki India in its statement said the turnover of the SMG in the last financial year ended on March 31, 2023 was Rs 318,525 million.
RC Bhargava, Chairman of Maruti Suzuki India, said that Maruti Suzuki will take over EV production at the Gujarat site, replacing Suzuki Motor Corporation. He further stated that the acquisition of the facility is expected to be completed by the end of FY24.
"EV production at Gujarat facility will now be done by Maruti Suzuki instead of Suzuki Motor Corporation. Acquisition of Gujarat Plant will be completed by FY24 end," said RC Bhargava.
The valuation of Suzuki's stake has not been determined yet, as it depends on the book value, RC Bhargava said, while adding that the battery plant will remain separate from this transaction, and also said though they are open to purchasing the battery plant from Suzuki, a final decision has not been made yet.
"We have not arrived at any valuation of Suzuki's stake, it depends on the book value. Suzuki's Battery plant will be independent of this transaction. Open to buy the battery plant from Suzuki but we have not taken a final call. Once we take over the plant, employees of the the Gujarat facility will be now part of MSIL's workforce, added Bhargava.
Maruti Suzuki aims for 4 million cars production per annum by 2030-31
Maruti Suzuki India stated that due to the growth in the Indian car market and potential for exports, they plan to increase their annual production capacity to about 4 million cars by 2030-31, nearly double the current levels.
The expansion will happen in multiple locations, with some already identified and others still being studied.
In response to the carbon neutrality requirements, Maruti Suzuki acknowledges that a mix of powertrain technologies, including EVs, Hybrids, CNG, Ethanol, etc., will coexist for a reasonably long period of time. However, managing the intricacies of production at such a large scale with multiple powertrains, under different managements, will present several challenges, according to Maruti.
In terms of actual production, logistics, sales and the cost thereof, there will be no change as the cars earlier supplied by SMG as a contract manufacturer, will now continue to be supplied as before, it said.
Maruti Suzuki India Limited (MSIL) on July 31 reported a 145.5 percent jump in its net profit at Rs. 2,485.1 crore during the first quarter of FY 2024. The country’s largest passenger vehicle maker’s revenue for the quarter rose 22 percent YoY to Rs 32,326.94 crore.
Maruti Suzuki’s scrip on July 31, closed 1.42 percent higher at Rs 9,806.25 apiece on the BSE.
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