Maruti Suzuki set to drive in biggest ever capacity expansion in India

New Delhi: Japanese carmaker Suzuki Motor Corp. plans to expand production capacity by as many as 2.5 million cars a year in the decade to 2030 as it lays the groundwork to maintain its dominance in India, where it sells one in two cars.

The capacity expansion, the biggest ever planned by Suzuki or its local unit in India, will be divided into two phases, two people aware of the plans said, requesting anonymity. Suzuki will first expand its Gujarat plant by adding capacity to make 750,000 cars starting 2020. In the second phase, it will build a new plant, Suzuki’s fourth after those in Gurgaon, Manesar and Gujarat. The new factory, location of which has not been identified, will have a capacity of approximately 1.5 million units and is expected to be announced around 2025, the people said.

On completion of the two phases, Suzuki’s total vehicle manufacturing capacity in India will be about 4.5 million or more than double the 1.75 million vehicles it makes now (1.5 million in Gurgaon and Manesar and 250,000 in Gujarat).

The management of Maruti Suzuki told some suppliers about the expansion plan at a recent meeting in Abu Dhabi.

Maruti Suzuki plans to sell 5 million passenger vehicles annually by 2030, Osamu Suzuki, chairman of Maruti’s parent, said at a post-earnings conference call earlier this month.

An email sent to Maruti Suzuki on Tuesday remained unanswered till press time.

By 2025, Maruti Suzuki aims to sell 3 million units—about the current size of the Indian market.

“Suzuki plans to invest in expanding its existing capacity in Gujarat, otherwise it will be difficult to meet the three million-mark by 2025. The company is also planning how to maintain the dominance beyond that period, for which they need another plant,” said one of the two people cited above.

Production of the new version of the Ciaz—a mid-size sedan—expected to be launched in 2020, will be shifted to the Gujarat plant as well, this person added.

According to the second person, who was also present at the annual vendor conference, the management has told vendors about its plan to hold on to its 50% market share and implicitly, this means that investment in the future capacity is in the offing.

Suzuki intends to invest $1.5 billion in research and development, mostly to ward off competition from Korean and European rivals in India. Mint reported earlier that Suzuki is also looking to invest in developing a range of hybrid vehicles and more efficient gasoline engines for the domestic market in the next decade.