Maruti to run out of capacity next year

The Gujarat plant, bogged down by delays, may miss target of starting production by 2017

Delays in getting approvals for a new manufacturing plant in Gujarat could seriously affect the production target of Maruti Suzuki. The Delhi-based car maker is staring at a possible exhaustion in production capacity beginning 2017.

“Our manufacturing capacity in Gurgaon and Manesar will be fully utilised next year, and we need new capacity,” said R C Bhargava, chairman, Maruti Suzuki, in the company’s annual report.

While Gujarat chief minister Anandiben Patel laid the foundation stone of Suzuki Motor Corporation’s first manufacturing line in the state in January this year, production is expected to begin only in 2017. Even this date could change in the event of shareholders blocking the move, which will result in further delays.

Suzuki Japan, which owns 56 per cent in Maruti Suzuki, is fully financing the investment in Gujarat. The cars produced at the Gujarat plant will be later sold to Maruti Suzuki at cost price. This move has been opposed by the company’s minority shareholders, who say it will reduce the Indian firm to a mere marketing and sales company in the long run.

“The time table for minority shareholders’ voting on this arrangement will be announced as soon as certain procedural formalities have been completed. I’m confident that you, our shareholders, fully understand the benefits of this arrangement,” added Bhargava.

On the back of new launches and refurbishments, Maruti saw sales of 1.29 million vehicles last year, registering a growth of 11.1 per cent over the previous year, taking the pushing the market share to 45 per cent. The combined capacity at both the existing plants of Maruti at Manesar and Gurgaon stands at 1.5 million units. This means the company will find it difficult to grow production at 15 per cent this year and the next.

Considering that new and refurbished products are due to hit showrooms later in the year along with continued growth in exports (last year exports grew 20 per cent), which form 10 per cent of Maruti’s total sales, the company could face a production constraint next year. This year’s export target would be to at least match the sales of last year if there is a no-growth scenario.

“The company ramped up production in the recently commissioned Manesar Plant-C while production from the Gurgaon facility remained at a level similar to that of the previous years,” said the annual report.

The company has also confirmed that a new compact urban sports utility (SUV) vehicle based on the XA Alpha Concept, which was showcased in the last Auto Expo, will be launched in the coming months. This new SUV, which will compete against the Ford EcoSport and the upcoming Mahindra TUV 3OO, could be launched in 2016. It will be a sub four-metre vehicle.

Further, a new premium hatchback code named ‘YRA’ is also set to be launched in the coming months. It will be positioned above the best seller Swift and will complement the recently-launched premium crossover S-Cross.