Maruti Suzuki begins trial runs for compact Dzire

Maruti Suzuki begins trial runs for compact Dzire

New Delhi: Maruti Suzuki India Ltd’s Manesar plant, which has faced labour unrest since June, is preparing to roll out a new compact sedan to take advantage of lower tax rates on models that are shorter than 4 metres in length.

Maruti Suzuki’s Manesar factory, which has only produced the Swift hatchback since the second round of workers’ protest started on 29 August, is testing the sub-4-metre car built on the Swift platform for introduction during the Delhi Auto Expo in January or even earlier, according to two company officials, who declined to be named.

The Manesar factory also makes A-star hatchback and SX4 sedan and can produce 1,200 cars a day.

The new sedan—known as Swift 3.99 among workers—is being developed at an investment of at least 500 crore and may primarily be targeted at markets outside India as people in Europe and Latin America prefer smaller, fuel-efficient cars as the slowdown in the global economy reduces incomes.

There were at least 20 such cars including a few left-hand drives meant for overseas markets parked inside the plant. A Mint photographer was prevented from taking pictures of the car.

“We have started the trial runs," said an official at the plant, who did not want to be named and refused to share more details. A formal name for the car has not been decided.

“If the trial runs have started, then it is quite possible that we may see the car much before the Auto Expo," said Shapur Kotwal, deputy editor, Autocar India magazine.

I.V. Rao, managing executive officer, engineering, at Maruti Suzuki and Shashank Srivastava, chief general manager, marketing and sales, declined to comment.

The car will be fitted with a 90 bhp engine in both petrol and diesel versions. The only major difference is a significant reduction in the boot space compared with the Swift Dzire. The interiors are somewhat similar to the new Swift.

Maruti Suzuki is planning to introduce a shorter version of the Dzire, which is 4.16m long, to avail the benefit of lower excise tax, a move that will give it room to be more price-competitive. The existing Dzire puts it in the category of a big car, attracting excise duty of 22% compared with 10% for a car that is less than four metres long.

The current ex-showroom price of the Dzire in Delhi is 4.94 lakh. However, the compact Dzire is likely to be priced around 4.49 lakh.

The shrinking of the Swift Dzire will also help Maruti Suzuki fend off competition from cheaper models such as Toyota Motor Corp.’s Etios and Tata Motors Ltd’s Indigo sedans at a time when higher interest rates on automobile loans have discouraged car buyers. At least 70% of Indians borrow to purchase cars.

“Etios sedan, which sells at less than 5 lakh, is a threat to Dzire," said an industry expert, who did not want to be named.

In the 2006 Union budget, the then finance minister P. Chidambaram gave special benefits to small cars to boost local production and promote India as a global small-car manufacturing hub.

The budget proposed an 8 percentage point excise duty reduction to 16% for cars less than 4m in length and with petrol engines displacing less than 1,200cc or diesel engines smaller than than 1,500cc.

The Dzire comes with a 1,200cc petrol and 1,250cc diesel engine that meets the engine displacement criteria.

In 2008, Tata Motors was the first to take advantage of the tax incentive for smaller cars by introducing the Indigo CS model. The car maker chopped the boot off the Indigo, dropped its length to 3.9m, and passed on some of the benefit of the lower tax to customers.

As a result, the Indigo CS, or compact sedan, became approximately 50,000 cheaper.

The Economic Times had last year that Mahindra and Mahindra Ltd was planning to do the same with its multi-utility vehicle Xylo.