Plagued by capacity constraints amid increasing demand, Maruti Suzuki India is preparing a feasibility study for setting up a third unit at its Manesar facility.
The unit will provide additional capacity of 2.5 lakh units and could entail an investment of up to Rs1,700 crore.
Chairman RC Bhargava confirmed to DNA that the company is readying a project report for expanding capacity further at Manesar, but did not provide further detail.
The expansion plan, which needs to be cleared by the company’s board of directors before it can be implemented, comes even as a similar investment in the second unit at Manesar is still under implementation. The company is investing Rs1,700 crore to take its total installed capacity to 1.25 million units by 2012.
The third unit will take its overall capacity up to 1.5 million units beyond 2012.
Asked whether Maruti was still keen to do contract manufacturing for other car makers, despite facing severe capacity constraints itself, Bhargava said, “If someone comes up with a contract manufacturing proposal, then we will have to look at setting up fresh capacities.”
Maruti currently supplies A-star cars, badged as Nissan Pixo, to Nissan Motor Co for its European markets and is also “open” to the idea of making cars for Volkswagen AG, which is a joint venture partner of its parent company, Suzuki Motor Corp.
Separately, executive officer (marketing & sales) Mayan Pareek said the company has adopted a staggered policy while stocking up dealers for the festival season.
When asked about inventory levels, he asked, “What inventory?” Maruti has been functioning on a lean inventory of a week to 10 days even during this season of peak demand because it claims to be making all the cars it possibly can across its twin plants at Gurgaon and Manesar. Pareek said the company was still falling 20% short on demand and long waiting periods continued on six of its models.
He also pointed out that because of the demand pull, discounts this festival season would be much lower than in the last few years for Maruti cars. “The highest discount this time is `25,000 on the Estilo. Discounts are the lowest in the last 3-4 years.”
Maruti Suzuki India’s Manesar plant has an annual production capacity of three lakh units, while the Gurgaon plant produces seven lakh units per annum. Recently, the company’s managing director and CEO Shinzo Nakanishi had stated that the Indian car market is likely to double to five million units by 2015 and the company needs to be prepared to meet the growing demand in order to maintain its leadership position.
According to the Society of Indian Automobile Manufacturers, the market leader sold 2,82,488 cars during the April-July period this year, representing a 47.68% share in the overall 5,92,405 units market. In the comparable period a year ago, the company had a 53.13% share in the 4,40,069 units car market, with sales of 2,33,811 units. It is hopeful of regaining an over 50% share of the domestic passenger car market by the end of this fiscal.
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