Maruti Suzuki's 10-Lakh Unit Capacity Expansion To Be Executed With Kharkhoda Plant
The announcement of the new plant underlines the company's assessment of higher demand in the coming years.
Maruti Suzuki India Ltd.'s plan to expand annual capacity by up to 10 lakh units will be executed alongside its already announced Kharkhoda plant in Haryana with the same planned capacity.
"The work on the new plant will be carried on simultaneously with Kharkhoda," Chairperson RC Bhargava said, in a media call to discuss the company's performance in the fourth quarter. "Kharkhoda is, of course, ahead of the new plant wherever it will be."
The announcement of the new plant underlines the company's assessment of higher demand in the coming years, as the plant in Kharkhoda was announced less than a year ago. The plant, which is spread across 800 acres in Kharkhoda, is expected to start production of 2.5 lakh units per annum by 2025 and can be expanded up to 10 lakh units.
India's largest carmaker's current annual capacity is over 20 lakh units, including its plants in Manesar and Gurugram, along with the vehicles that are supplied by its contract manufacturing unit in Gujarat.
The company didn't share details on the investments required for the new plant or timelines related to the commission of the new plant.
"We have kept the phasing of new capacity additions open, to adjust to market demand as needed," Bhargava said. "We don't want to be caught napping when the market develops further."
The carmaker has laid out a capital expenditure of Rs 8,000 crore for fiscal 2024, up from over Rs 6,300 in the previous fiscal.
Bhargava said the new plant is likely to require investment slightly upwards of what has been allocated to the plant in Kharkhoda, as the capacities are the same. At the time of the announcement, the Kharkhoda plant was to be commissioned at a total investment of Rs 18,000 crore.
The company, however, did say it would be financed through internal accruals. The cash reserves at the end of fiscal 2023 stood at around Rs 45,000 crore.
Where's The Demand?
The announcement comes amid expectations of much lower 6–7% growth for the car industry in fiscal 2024 and problems related to semiconductors being stickier than earlier thought.
"Industry will continue to have problems related to semiconductors," Bhargava said. "The kind of improvement we were hoping (for), still hasn't happened."
However, Maruti Suzuki expects to outperform the industry's showing in the current fiscal and remains hopeful for robust demand in the coming years.
The company's exports may increase to 7.5 lakh units per annum by 2030, from 2.9 lakh units in the fiscal 2023.
Bhargava said the projection is significant as the number is as high as the annual capacity of its contract manufacturing unit in Gujarat.
However, the maker of models like Alto and Wagon-R said demand for hatchbacks is likely to remain stagnant in the current fiscal due to affordability issues, continuing the weakness in the segment for another year.
The company plans to launch six electric vehicles by 2030, most of them in the SUV category. But focus on other fuel options such as CNG and ethanol will continue, it said.
