New Delhi: Suzuki Motor Corp. has commenced work on two diesel engine prototypes—a first for the car maker—at its engine development centre in Manesar near Gurgaon. This comes amid talk of a possible break-up of the partnership between the Japanese company and German car maker Volkswagen AG (VW).
The diesel engines being developed will be the first to be indigenously developed by Suzuki Motor, three persons with direct knowledge of the matter told Mint. Two of them are working on the project. All of them requested anonymity.
“This is a five-year project, which kicked off at the beginning of this fiscal,” said one of the persons cited above. “A team of 30 engineers from India and Japan is being formed. Most of the recruitment for the project has been done.”
The project will initially focus on developing two kinds of engines—90 bhp and 75 bhp— and later another smaller one.
In 2009, Suzuki and VW signed an agreement under which the Japanese car maker was promised access to Volkswagen’s diesel technology and the German company was assured help in small car markets such as India.
“This is interesting. Suzuki’s lack of diesel technology has often hurt the company and it had to rely on technology sourced from Fiat,” said an expert with a leading consultancy firm. “We don’t have to look anywhere else but in India. Maruti first tried to go luxury with the Grand Vitara as a CBU (completely build-up unit) from Japan, but failed. The Suzuki SUV (sport utility vehicle) just wasn’t competitively priced and the absence of a diesel engine didn’t help.”
R.C. Bhargava, chairman of Suzuki’s local unit Maruti Suzuki India Ltd, said it was not easy to buy engines from other companies. In the long term, it is not feasible as it requires a lot of approvals. However, he refused to comment on the story.
“Suzuki is majority stakeholder in the powertrain facility. I would not like to comment on this,” he said. An email sent to a Suzuki spokesperson on 11 August did not elicit any response.
The diesel engines are being developed at Suzuki Powertrain India Ltd—a 70:30 joint venture between Suzuki Motor and Maruti Suzuki—at Manesar. It manufactures diesel engines and transmissions for cars.
“The project is under the supervision of two veteran engineers from India. They hold a technical review meeting every Monday to check the development,” said the second person involved with the project. “There is no fixed investment. It is still not in full swing due to hurdles related to decontrolling of diesel in India—the largest market for Suzuki.”
Suzuki currently does not have its own diesel engine and buys the technology from Fiat SpA. The Italian company provides the 1.3-litre multijet diesel engine that powers Maruti’s Ritz, Swift and DZire models.
Last month, Suzuki also agreed to buy a 1.6-litre diesel engine from Fiat’s powertrain unit to install in a car it will build in Hungary in 2013. The Japanese auto maker has been buying 2-litre diesel engines from Fiat Powertrain Technologies since 2006 for the SX4 made in Hungary.
“It is a long-term project and does not have a commercial motive as such. The idea is to be prepared for increasing demand of diesel cars in India and the company’s ambition in the Western market, which it thinks will revive by 2013 and where diesel still is a preferred fuel,” said the third person in the know.
India has seen a recent spurt in demand for diesel cars largely due to the price advantage against petrol. In New Delhi, diesel is retailed at Rs 41.29 per litre, at least Rs 26 cheaper than petrol. Currently, little under one in three passenger vehicles sold in India run on diesel.
Suzuki’s aspiration for diesel technology is well known. After signing a licensing agreement with Fiat in 2006, the Japanese auto maker formed a partnership with VW in 2009 to cooperate in small cars and new technologies. VW acquired a 19.9% stake in the Japanese group—which owns 54.21% stake in Maruti Suzuki—while Suzuki bought about 2.5% of VW. The deal promised VW the chance to build a bigger presence in the small car markets in India and Japan, while Suzuki hoped to gain access to VW’s expertise in diesel engines.
However, reports of tension between the partners soon emerged, with Yasuhito Harayama, Suzuki’s executive vice-president, last month saying that the groups have not cooperated on any projects in the 19 months since the alliance was formed. However, both companies subsequently sought to play down the differences.
Problem cropped up when a report in German newsletter Platow Brief, which did not say where it obtained the information from, highlighted concerns over the future of the alliance between the two auto makers.
Last month, Osamu Suzuki, chairman of the Japanese company, wrote in his blog that none of VW’s technologies were interesting enough to be adopted and that for the time being, Suzuki was in no hurry to collaborate in critical markets such as India.
“We are producing more than 200,000 units of our diesel engine, which is attracting a lot of attention in India. Thus, for the time being, particularly in critical markets like the minicar market and India, we are not in a hurry to collaborate with Volkswagen,” Suzuki wrote in his blog.