Maruti has plants in Manesar and Gurgaon also with combined capacity of 1.5 million units a year
The slump in demand notwithstanding, Suzuki Motor Corporation, the parent of the country’s largest carmaker Maruti Suzuki will go ahead with its long term plan of doubling capacity at its newest plant in Gujarat.
The Delhi-based carmaker intends to source 750,000 cars a year from the Hansalpur-Gujarat plant by the end of 2020.
Currently, there are two operational production lines at that factory capable of producing 500,000 units a year. But due to poor retail demand conditions, the plant is operating at 77 percent of optimum utilisation rate. The company produced 96,272 cars in the March quarter and 96,603 cars in June quarter. At the moment, Swift and Baleno are made at this plant.
Speaking to analysts, Ajay Seth, Sr. Executive Officer of Finance, Corp. Planning, Maruti Suzuki India said, “We work with a long-term view of business and we have seen these cycles in the past also. Our plan is based on a much longer period of time. And therefore, we will go on track on what we have announced and planned so far. There will be no stoppage of that.”
Suzuki planned the capacity in a way which will allow it to expand it further in the future to 1.5 million a year. Speculations were rife that the country’s car market leader had reservations about further expansion of capacity give the severity of the on-going slowdown.
“These are cyclical phenomena as we have seen from time to time. So this is something that we will be able to deal with and I'm sure that things will improve. And therefore we will not be delaying any of our plans that we announced,” added Seth.
Following the commencement of production from Gujarat, Maruti was incurring added logistics costs for transporting vehicle components from plants based in Haryana. Hit by the slowdown, Maruti vendors were sceptical of making investments in Gujarat.
During the April-July period sales of Maruti Suzuki's passenger vehicles slumped by 25 percent to 611,394 units. The fall is in line with the fall of sales of the industry. In July, Maruti’s sales skid 37 percent, the worst in more than a decade.
The industry is not very optimistic with regards to the upcoming festive season where retail demand is expected to be under pressure. Factors like tighter financing options, high fuel rates, high-end costs to consumers including raised insurance costs will continue to dent demand, say experts.Maruti has plants in Manesar and Gurgaon with a combined capacity of 1.5 million units a year.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.