Suzuki set to go slow on third plant in Gujarat

Suzuki set to go slow on third plant in Gujarat
NEW DELHI: The slowdown in the car market and pressure on Maruti’s sales is prompting its Japanese parent Suzuki to go slow in its India expansion. After setting up its independent manufacturing factory in Gujarat (which supplies vehicles to Maruti), Suzuki is understood to have slowed the construction of a third plant, which was to begin production in the fourth quarter of this fiscal, with an investment of nearly Rs 3,800 crore.

The development comes within days of Suzuki announcing at its annual financial performance in Japan that Maruti’s sales in India could fall by 20% this fiscal, against a previous forecast which had predicted a 4% growth.

Suzuki has two plants at Hansalpur in Gujarat, and these have a cumulative vehicle production capacity of 5 lakh units, apart from a powertrain manufacturing unit. The third plant, which would be adding another 2.5 lakh units to the output, has been under construction, though the work seems to have slowed down now.

A spokesperson for Maruti said the company cannot offer any confirmation on the change in schedule, which was first reported by Japan’s Nikkei news. Officials said on condition of anonymity that “slowdown pressure has been intense” and the company is re-evaluating several projects, though “it’s difficult to talk about Gujarat since it’s a project managed by Suzuki.”

Maruti’s passenger vehicle sales have fallen by 23% in the seven months ending October this fiscal (though numbers managed to grow by a marginal 2% in October.) As the company’s net profit declined by 35% in first half of the fiscal, chairman R C Bhargava recently said fresh demand generation remains difficult in the industry, and added that discounts have been at record levels. Apart from Suzuki’s five lakh-unit annual capacity, Maruti produces nearly 15 lakh units between its two factories in Haryana (located in Gurgaon and Manesar).

Bhargava has said that rising costs of cars, led by stricter safety and emission norms, and tighter finance availability for dealers and customers have hit demand.