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Maruti Suzuki looks to advance expansion plan

Maruti Suzuki looks to advance expansion plan
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First Published: Wed, Aug 04 2010. 02 59 PM IST
Updated: Wed, Aug 04 2010. 02 59 PM IST
New Delhi: Maruti Suzuki, India’s top car maker, is looking to speed up expansion plans to meet booming demand in the fast-growing south Asian country, its managing director said on Wednesday.
Shinzo Nakanishi also said the company, 54.2% owned by Japan’s Suzuki Motor Corp, does not expect royalty payments to its parent to rise from about 5% of sales now.
In the June quarter the company’s profit had dropped 20% on an unexpected rise in royalty fees, and triggered a slide in its shares.
Maruti reached full capacity of 1 million vehicles a year in March and has been struggling to cope with long queues of buyers.
It is building a second unit in the northern state of Haryana to add another production capability of another 250,000 vehicles a year, scheduled for completion by April 2012.
“I want to prepone as much as possible,” Nakanishi told reporters at the launch of an upgraded version of its best-selling Alto hatchback fitted with a 1 litre K-series engine.
He did not give a definite deadline.
Maruti, which sells one of every two new cars in India, has been losing market share to newer entrants such as Ford, Volkswagen and General Motors all of which have launched their own compact cars.
In the June quarter its market share dropped to 56% from 61% in the year-ago period.
Apart form its own production constraints, Nakanishi said supply bottlenecks from vendors were also affecting output.
In recent months component supply constraints had led to backlogs of up to 20% of its normal sales on almost all its models, marketing head Mayank Pareek said.
Maruti has also asked vendors to step up their investments in capacity expansion, he said.
“We are trying our best to fulfil demand,” he said.
Sales during April to July, the first four months of 2010-11 fiscal year, rose 26% from a year earlier to 384,181 vehicles., However, exports to Europe have fallen 20-30% from a year earlier due to removal of incentives by countries such as Germany, Britian and France, Nakanishi said.
“To maintain the same export volumes as last year we have to find markets other than Europe,” he said. The company has said earlier it was looking at newer markets such as Africa, Australia and New Zealand.
At 2.50 p.m., Maruti shares valued at $7.6 billion were trading little changed at Rs1,212.15 in a flat Mumbai market. The stock has fallen 22% so far this year, while the main index is up 3.7%.
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First Published: Wed, Aug 04 2010. 02 59 PM IST
More Topics: Maruti Suzuki | Cars | Expansion | Auto | Ford |