Maruti’s Gujarat Expansion plan(t)s Put On Hold

Published: Tuesday, December 13, 2011, 17:47 [IST]

Maruti Suzuki 's sales woes finally appear to have had an impact on its investment plans. The leading Indian carmaker by sales has stated it will relook at its investments and also delay them considering the current reduction in sales. The company has also stated the increasing fuel prices and interest rates were also a reason behind this decision.

Maruti Suzuki had earlier decided to build a new car plant in Gujarat and invest over Rs.4,000 crores in to the plant. The decision was made at a time when the carmaker was under severe pressure due to the strikes at Manesar. With demand for some of its models waning and sales declining even during the usually hot festive season, Maruti Suzuki has realised it cannot make huge investments.

RC Bharagava, chairman of Maruti Suzuki has stated that the carmaker was looking at its long term investments and may have to delay some of the investments by six months to one year. Maruti Suzuki is still in the process of acquiring lands needed for the plant. He also added construction of the new plant will not be started immediately. He also said the construction will begin only after two to three years.

He said: “Land acquisition process is on and we hope it will be concluded in this month. I don't think we will start work on it for some years from now at least two to three years. We should see the market situation. We will need Gujarat plant when the Manesar plant capacity is fully utilised. So, that depends on how the market grows. So, I can't give a date on this."

The strike at Manesar has had a lasting impact on Maruti Suzuki. The losses it suffered during the strikes and the following slide in sales has meant its finances are not as healthy as it previously was. Its sales have dropped more than the industry average and it needs to recoup its position. Despite the delay in its Gujarat plans, Maruti Suzuki is keen to complete its ongoing projects in Manesar. It will soon complete the third unit in Manesar that will take its annual production capacity to 1.7 million units.