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Maruti delays Gujarat plant

Maruti had planned an investment of Rs 4k-cr, with initial capacity of 2,50,000 units by 2015-16

BS Reporter  |  New Delhi 

Maruti Suzuki India, the country’s largest car maker, on Tuesday said it would delay the commissioning of its facility in Mehsana, Gujarat, its third in the country.

Chairman R C Bhargava said, “It is unlikely we would commission the unit in Gujarat by the end of 2015-16. The slowdown in the automobile sector is very acute.” The company hasn’t started construction at the site yet.

Before taking a decision on the commencement of the project, the company would conduct a detailed study of demand for automobiles in the domestic market through the next two-three years.

In June last year, the Gujarat government had allotted the company 700 acres for its manufacturing unit in Mehsana.

For the facility, the company had planned an investment of Rs 4,000 crore, with an initial capacity of 2,50,000 units by 2015-16. However, Maruti Suzuki hadn’t specified when it would commence work on the unit.

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Earlier this year, the company had acquired an additional 700 acres in Vithlapur to set up a second unit in the state.

On being commissioned, this would double its annual production capacity to three million units.

Maruti is on track to commission its third assembly line in Manesar next month.

The optimum capacity at Manesar could rise to 8,50,000-9,00,000 units a year. Once the third line at Manesar is fully on-stream, Maruti Suzuki would have a combined capacity of about 1.5 million units across Gurgaon and Manesar.

It is expected the company’s sales this financial year would stand at about 1.17 million units, a level seen last financial year, too. This would leave the car manufacturer with excess capacity.

Maruti Suzuki’s decision to postpone the commissioning of its third unit in Gujarat comes at a time when passenger car sales in India have declined for the ninth consecutive month.

In the April-July period, passenger vehicle sales have dropped 7.5 per cent annually to 7,93,708 units. Till July, the company had cut production two per cent to 3,67,680 units.

Commenting on the current economic scenario, Bhargava said, “All the indications are that the GDP will grow below five per cent, the rupee is at an all time low, we do not see any change in the fundamentals, the situation will remain as difficult as before.”

He added that the only positive factor so far in the year has been the excellent monsoon season and hoped that the upcoming festival season would also be able to spur some growth.

Bhargava said, “Elections are also coming up and during elections there is a spurt in sales but these are only temporary, so the real thing is that we need to see what happens after election and it would depend on what kind of government comes into power, whether it can bring reforms to spur growth.”

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First Published: Wed, August 28 2013. 00:47 IST