Aggressive Maruti set to expand capacity to 1.75 mn by 2013

It would seem that older is bigger and fitter, at least as far as Maruti Suzuki India Ltd is concerned.

The country's largest carmaker on Tuesday announced a fresh R1,925 crore investment to set up a 250,000-cars-per-annum plant — its sixth in the country — at Manesar, taking its total capacity to 1.7 million.

The proposed new capacity is almost three times larger than the country's second-largest carmaker, Hyundai Motor India Ltd's 600,000.

'The demand for cars in India has grown beyond our expectations,' said Osamu Suzuki, chairman, Suzuki Motor Corporation, adressing shareholders at the company's annual general meeting. 'With this new plant (in Manesar), the total output from Maruti Suzuki India will be at 1.75 million units.'

With this new capex, the firm's overall investment has ballooned to over R6,000 crore till 2013. Importantly, this comes barely six months after Suzuki announced the setting up the second plant, in March.

With cash reserves of R7,000 crore and fresh cash-generating capacity of R3,000 crore per year, finding funds is the least of Maruti's problems. The challenge is how fast it can ramp up and thwart the new entrants who are all looking to eat into its dominant marketshare.

Maruti also said it will modernise its oldest plant in Gurgaon in view of changing times.

'The original line in Gurgaon has gone quite old and very soon we will have to look at revamping it,' said R.C. Bhargava, chairman, MSIL. 'While we start doing that, we will need some excess capacity in other plants or we will be short on supply again. Hence starting work on the Manesar plant alongside the construction of the second one there makes sense.'