Suzuki Motor Corp., owner of Maruti Udyog Ltd, India’s largest carmaker, plans to spend an additional Rs2,000 crore to upgrade existing factories and increase two-wheeler production, to counter plans by rivals to capture a bigger portion of the Indian market.
The investment is on top of a previously announced plan to pump additional money to improve and expand manufacturing, taking its total Indian investment to Rs11,000 crore by 2010. Maruti sells one of every two cars in India, but rivals, such as the Korean Hyundai Motor Co., are planning to dent that market by doubling capacity and introducing new cars.
“We need to further improve infrastructure,” said Osamu Suzuki, chairman of Suzuki Motor Corp. He was speaking using a translator at the inauguration of Maruti Udyog Ltd’s assembly unit in Haryana. As much as Rs 1,300 crore of the new funds will be used to set up a car-testing track and for research and development at Maruti’s existing factories in Haryana.
A 9% economic growth is creating more jobs and putting money in people’s hands. Only 7 in every 1000 people own a car in India, compared with 12 per thousand in Pakistan.
India’s 1.3 million a year passenger vehicle market is growing rapidly and demand may cross 2.2 million units by 2010, according to the Society of Indian Automobile Manufacturers. This has prompted car makers such as General Motors (GM) and Volkswagen AG to spend Rs30,000 crore to build factories. GM is investing Rs1,360 crore in a new small-car factory in Pune, while Volkswagen is building a Rs2,500 crore plant in the same city.
Suzuki is the smallest player in India’s two-wheeler market, which is second only to China. As much as Rs720 crore of the new funds will help create an additional capacity of 2,80,000 to its plant, which makes about 1,00,000 motorcycles a year. The company will also foray into scooters, which it abandoned after its split with the Chennai-based TVS Group in 2001.
After that, Suzuki entered the Indian two-wheeler market in 2006. But rivals such as Hero Honda and Bajaj Auto are spending Rs4,500 crore in building capacity to try and consolidate their lead. Hero Honda is building a factory in Hardwar, Uttarakhand, which will add 5,00,000 units or 13% to its existing 3.9 million units capacity.