Maruti to run out of capacity next year

Delays in getting necessary approvals for a new green field manufacturing plant in Gujarat will likely cost car market leader Maruti Suzuki the next year.

The Delhi-based company, which has maintained its tight grip on market shares and is eyeing agressive growth, might exhaust its production capacity.

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

Chief Minister of Gujarat, Anandiben Patel had laid the foundation stone of Suzuki Motor Corporation's first manufacturing line in January this year.

However, production is expected to begin only in 2017 considering shareholders do not block the move leading to delays.

Suzuki Japan is fully financing the investment in Gujarat, from which production will be later sold to Maruti at cost price, a move that has irked minority shareholders of Maruti Suzuki. A section of shareholders have raised doubts about this strategy as they fear it will reduce Maruti Suzuki to a marketing and sales company in the long run.

"The timetable for the minority shareholders voting on this arrangement will be announced as soon as certain procedural formalities have been completed. I am confident that you, our shareholders, fully understand the benefits of this arrangement", added Bhargava.

Maruti saw sales of 1.29 million vehicles last year, a growth of 11.1% and a market share of 45%. Combined capacity at both of Maruti's existing plants in Manesar and Gurgaon stands at 1.5 million units. Which means the company will find it difficult to grow production more than 15% this year.

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 by 20%), which forms nearly 10% of Maruti's total sales, the company could likely face a production constriant next year.

"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", stated the report.

The company also confirmed that a new compact urban sports utility vehicle based on the XA Alpha Concept showcased at the last Auto Expo will be launched in the coming months.

Maruti Suzuki India Limited