Maruti Suzuki is investing Rs1,200 crore to replace engines of existing models with a new light-weight fuel-efficient one that will conform to a new national emission standard to come in place next year.
In the long term, the company plans to gradually replace the existing series of engines with the fuel-efficient KB series engines. Maruti’s popular models Alto, WagonR, Zen Estilo, Versa and Swift will be strapped with new engines by April 2010 when new Bharat Stage IV (BS IV) emissions comes into place.
The new fuel-efficient engine will also help Maruti to compete with new cars like Honda’s Jazz, Volkswagen’s Polo and Fiat’s Grande Punto, which will be launched in the domestic market soon. Installation of the new engines could also see prices of these select models going up.
We maintain an ACCUMULATE on Maruti with a target price of Rs764.