Maruti to set up second plant in Guj; acquires 600 acres

Maruti Suzuki India said it has started spadework to set up its second facility in Gujarat with acquisition of another 600 acres, in addition to its existing plan to invest Rs 4,000 crore for setting up a plant in the state. The company also said it expects about 6-7 per cent sales growth in 2013-14 after closing the current fiscal with about 6 per cent rise in vehicle sales.

The country's largest car maker also said it will not enter the premium segment of passenger cars in India and will "protect" its image of a small car manufacturer. "We have land at two locations in Gujarat. The first one is offered by the government and the second one is a private land that is directly acquired by us with some negotiations by the government," Maruti Suzuki India (MSI) Chairman RC Bhargava told reporters.

The company has acquired about 600 acres, located about 40 km from the first site near Mehsana, he added. "The second location is for our future expansion. Once we exhaust the capacity at the first site, we will move to the second one," Bhargava said. He, however, did not share details such as when the firm is likely to start construction at the second site.

When asked if MSI is shifting its focus from Haryana, where it has recently witnessed severe labour unrest, Bhargava said: "We are not moving away from Haryana. We have two plants in the state and going to Gujarat after utilising the capacity completely at Gurgaon and Manesar. We will do the same once we exhaust the capacity in Gujarat also." He said the company will do the ground breaking ceremony for the Gujarat facility early next year.

MSI had earlier this year announced to invest Rs 4,000 crore, its biggest ever outside Haryana, to set up a 700-acre new production facility in Gujarat by 2015-16. Besides, components suppliers of the company are also likely to make an equal amount of investment to set up their respective plants. The capacity in the first phase will be 2.5 lakh units a year. Talking about the company's performance in this fiscal, Bhargava said: "We are going to end this year with a growth of about 6 per cent over last year. Overall, there is a sign of softening in India's car market due to various factors."

During the next financial year, the company is not expecting anything better than the current fiscal and it will grow in single digit only, he added. "We hope to grow 6-7 per cent growth at best in next fiscal, which is going to be the election year and so we don't expect anything drastic happening," Bhargava said. Commenting on exports, MSI Managing Director and CEO Shinzo Nakanishi said MSI is finding it tough due to the decline in European market.

"Last year we had a total export of 1.27 lakh units. This year we may be a little less than that because of the slowdown in Europe, which used to be our biggest overseas market."

MSI has been exploring new markets to keep its overseas sales momentum, Nakanishi said. Bhargava said: "I don't know when the European market will revive but we have been entering new markets like Algeria, which is one of our biggest now and we expect to sell around 25,000 units there." The company has also been exporting both completely built units and completely knocked down units to Indonesia amounting to about 40,000 units.

On the Sri Lankan market, Bhargava said sales have fallen by almost 50 per cent this year due to the increase in import tariffs by the government there. Asked whether the company would look to set up assembly operations overseas, he said: "It is possible in the course of next few years that we have overseas assembly operations in the markets where we are looking."

These overseas assembly plants could be run by Maruti directly and not by Suzuki Motor Corp, he said, adding however that "at the moment there are no such plans to set up assembly operations anywhere". On the company's plans to enter premium segment of Indian passenger car market, Bhargava said: "Maruti and Suzuki Motor grew and became profitable on the basis of small cars. Small cars in India is going to be a big segment in future also. MSI has the image that it is first class small car maker and I would try to protect that image."

He also ruled out MSI diversifying into the commercial vehicle segment. Asked about the progress at the violence-hit Manesar plant, Bhargava said the production has reached normal level of about 1,900 units per day. When asked if the company would reconsider to take back some of the workers that were fired after the violence in July, he replied in negative. While the company has terminated services of over 500 permanent workers alleging their role in the violence, which killed one senior official and injured nearly 100 others, the police has filed charge sheets against about 145 people only.

Asked about the police report, which contradicted MSI's claim of an outside influence and concluded that the violence was an internal matter, Bhargava said: "Police has not given us any specific reason why it happened... It is something like an unknown disease by an unknown virus. "Police evidence says there is no evidence of outside influence. Everybody has its own conclusion. As far as Maruti is concerned, whether there is an external influence or not, it does not matter on our decision (of firing the workers). We have to accept the police findings."

The company took disciplinary action against the workers based on testimonials and evidences gathered from managers and supervisors of the Manesar plant present at the time of violence, he added.

Also Read: Maruti acquires additional 500 acres land in Gujarat