Maruti Suzuki has found its moment to visualize its facilities delivering more capacities. This is the second such announcement from Maruti within two months. The new expansion will materialize anytime within the year end, said its Chairman. The company’s standard line is 250000 units at an investment of Rs1400-Rs1500crore. The proposed expansion will take place in the company’s Manesar plant at an additional investment of Rs1700crore. Given this move to get shape by 2012, the company believes, the capacity might increase to 550000 units from the existing 300000 units.
Alas, the analysts foresee that this taken into account, the company would face constraints in delivery. The company is facing the difficulty of waiting period for its some vehicles- Swift, Swift Dzire and Eeco having more than 3months. Maruti’s Gurgaon facility is fit for making one million units per year and it might be possible to increase it to 1.20 to release the bottleneck of operations in the shifts. The company is very careful not to repeat the flaw of delaying the delivery, as happened in the case of Tata Nano.
Normally the time required for an expansion of facility is 18-24 months, but Maruti has no deadline for this expansion spree. The expansion will take place till the backlog orders are cleared and after that there will be a new line outside Manesar, he added. Not alone Maruti, but so many car makers are facing this production constraint due to new launches, consumer choices and increase in car sale. The sale in last month was an increased 40% (143976 units) to that of the last month. Maruti is facing two fold problems – completion from other car makers and long waiting period for its vehicles.
Maruti is freed of financial constraints, as its cash reserves is Rs6000 crore. Hence the expansion will be a part of its activities from its own resources, except the initial 100000 units, the Chairman said. Meanwhile there is a talk among the officials of Maruti and Volkswagen(selling Polo and Beetle in India) for an amicable synergies. VW has got stake of 19.9% from Suzuki Motor at Rs11425 crore. However, Maruti has ruled out its sharing of VW facility at Chakan. Hyundai, a silent killer of the car market, is increasing its capacity to meet the demand. Its installed capacity is 600000 units but in 2009-10 it delivered 600639 units from its Chennai plant. From this year the plant will be free from making i20 numbering about 40000 units.