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Maruti Suzuki inks pact with Gujarat for third facility

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The country’s largest car maker, Maruti Suzuki India Limited (MSIL), on Saturday signed a state support agreement (SSA) with the Gujarat government for the purchase of land near Mehsana to set up its third manufacturing facility.

The company plans to invest about Rs 4,000 crore in the initial phase for procuring 700 acres of land and setting up the new manufacturing facility. A similar amount is expected to be invested by the company’s ancillary suppliers to set up a vendor park near the facility.

The new unit, expected to be commissioned by 2015-16, would have the capacity to roll out 250,000 units every year in the beginning. Future expansion plans at the unit would be chalked out in line with market conditions to meet demand in the domestic industry and to meet export commitments.

Speaking at the SSA signing ceremony, Shinzo Nakanishi, managing director and chief executive officer, MSIL, said, “As we take our first step in Gujarat, Maruti Suzuki is entering into a new phase of its business life. India has a bright future, wherein the auto industry is set to grow rapidly. Our plan for capacity expansion is to prepare for that growth even as the industry crosses over four million cars by 2015-16. Our new plant will take our combined capacity to two million units.”

“We will generate direct employment of over 2,000 people. In addition, the ancillary units in the vicinity and supplier park will generate additional employment opportunities,” Nakanishi added.

The details of the investment and the capacity to be commissioned in the initial phase are awaiting approval of the board of MSIL.

“Maruti Suzuki’s Gujarat plant will be located around 100 km from Ahmedabad. The new facility is about 300 km from the Mundra port and hence would be well suited for company’s export initiatives,” the company said in a statement.

The company would be the fifth automaker to drive into Gujarat over the past few years. While Tata Motors and General Motors already have plants operational in the state, Ford India and Peugeot Citreon had announced investments of Rs 4,000 crore each to set up new manufacturing sites at Sanand. Peugeot Citreon, however, stalled plans for the new unit in February this year as a part of a massive cost-cutting exercise initiated on the back of slow global sales.

Maruti Suzuki said it would continue to increase its production at its Manesar facility, where a third assembly line, (Manesar C plant with a capacity of 250,000 units annually) was expected to go on stream by mid 2013-14. Overall, the company would have the capacity to produce two million units from across its three plants in Gurgaon, Manesar and Mehsana by 2015-16.

Earlier in May last year, the company had announced plans to acquire 1,000 acres of land to set up a new unit, the first outside the state of Haryana. Maruti Suzuki was expected to invest close to Rs 6,000 crore to produce one million units by 2015. Total investment in the project was expected to be about Rs 18,000 crore, which was inclusive of the resources to be invested by component suppliers to set up a vendor park near Maruti Suzuki’s Mehsana unit. The plant was expected to have a total installed capacity of two million units per annum by 2020.