Maruti on the defensive strategy – to shield 50% share
Maruti Suzuki does not want to take any chances to slid its stronghold of 50% share in the market. For this the company has strategically increased its production capacity by 75% in the next five years. This means, responding to the market demand, the increase of production would be 1.5- 1.75 million passenger cars, by 2015 said the company’s MD.
The strategy would enable the company to retain its supremacy of 50% share in the entire market fold of around three million by then. By the end of this fiscal year, the capacity would be increased to one million cars by the time the Manesar unit will be ready. The investment of Rs3000 – 4000 crore, will be ratified by the apex board in Japan in January. This will enhance the production capacity to 5-7lakh units. If materialized, this will be the next high amount after the 2006 investment of Rs9000 crore.
Though the proposal is getting finalized, the increase in production will be on the phases. Manesar plant has an area of 600 acre of which two-thirds are idle, in which the company plans to erect two units to produce 600000 cars. Maruti Suzuki thrives to remain in the forefront by shielding its 50% share amidst the tough competition in the small car industry.
The industry has a net 80% market in which Maruti dominates respite the grave threat from Nano, and the promising potential of Toyota, Honda, Volkswagen and Ford. Maruti, an offspring of Suzuki, is promoted by the Indian government and has been on the rise with the entry to every nook and corner – rural and urban markets- with its all around ranges.
Maruti’s stint in April-November period witnessed a whooping 30% hike (6,46,139 cars including exports). Currently, Maruti has been striving to penetrate the export market – 140000 cars by this year, including 1lakh A-Star hatchbacks. The boost came in the form of scrappage scheme in the European market- exchange of cars- and the scheme is nearing the end. On the other side, Suzuki is fishing outside the European shore- Australia, South America, Middle East and South East Asia (Thailand and Malaysia).
The company seeks to shell out 150000-200000 units of export which includes Nissan, by 2010. Nissan and Suzuki are in an agreement to build 50000 A-Star for Nissan entirely for the European market on the lines of Nissan Pixo. The company is fully aware of the risk involved in the agreement despite the business volume , said the MD. That is why the company is restricting its OEM to Nissan with 100000-150000 units a year.
Apart from the existing two plants- Gurgaon and Manesar- the company plans to erect another one in Manesar with a production capacity of 300000 units per year. An investment of Rs130 crore has been made for additional production capacity in Gurgaon – from 80000-90000 units to 8 lakh cars a year. Gurgaon designs Alto, M800, Ritz and Swift petrol while Manesar takes care of Dzire, A-Star, SX4 and other models.
A proposal to shuffle the models between the plants is also under consideration, said MD. Manesar may get the production of Ritz diesel, as the unit has the powertrain for diesel, so is the case with Wagon R.