Even as it continues to pump in more money for a second unit at its upcoming Mehsana plant, Japanese automaker Suzuki Motor Corp (SMC) is gearing up for an early 2017 launch of the first unit. Work is on full swing for commissioning of the first unit, which is being set up by SMC's subsidiary Suzuki Motor Gujarat (SMG).
According to sources, trial runs have been running successfully at the Gujarat plant of SMC, which entered into a contract manufacturing agreement with Maruti Suzuki India Ltd. (MSIL) for producing and selling vehicles to the latter. Commissioning of the first unit is being expedited, it has been learnt, given the difficulty in meeting rising demand for its models like Vitara Brezza and Baleno.
Set up at an initial capacity of 250,000 cars a year, the first unit is likely to be exhausted in just two years since commissioning, forcing SMC to invest further for a second line which is likely to come up by 2019.
The company's Japanese parent Suzuki Motor Corporation (SMC) has thus decided to pump in another Rs 2,600 crore into the Gujarat plant for the second assembly line that would add another 250,000 units per annum capacity, taking the total investment in the Mehsana plant to Rs 5,800 crore, as per a November 18 notification on the Tokyo Stock Exchange.
"This capital increase is to fund capital expenditure for facilities of SMG's second assembly plant and engine/transmission plant which Suzuki plans to start operation in 2019 to prepare for the future growth of Indian automobile market and for the expansion of exports from India," Suzuki Motor Corp said in a notification to Tokyo Stock Exchange on November 18.
For now, the SMC subsidiary can set up six assembly lines, each with a capacity to make 250,000 units a year, at Hansalpur and Vithalapur sites in Gujarat. Each site, separated by a distance of 30 kms or so, will have a capacity to produce 750,000 units. Both sites together would add a capacity of 1.5 million cars a year.
As per sources, the company is likely to make its upcoming compact cross-over Ignis in Gujarat apart from the hatchback Baleno. While production of Ignis is also expected to be made at the company's plants in the National Capital Region (NCR), the source said that given the proximity of the Gujarat plant to the ports and that MSIL has flexible manufacturing lines, the export units of the Ignis might be made in Gujarat.
Market sources also indicated that the new generation Swift, which is expected to debut in Geneva Motor Show in March 2017, could also be made at the Gujarat plant. The same could not be confirmed with the company.
As for the Baleno, the company has ambitious plans for exports of that model. It is currently exported to countries like France, Denmark, Germany, Greece, Hungary, Iceland, Italy, Japan, Netherlands, Poland, Spain, Sweden, Switzerland, Chile, Israel, England, Nepal, Bhutan, Austria and Australia. The longterm plan is to export the car to around 100 countries, and hence Gujarat is a strategic location for making the model.
It is estimated that capacity for the Baleno and another new model Vitara Brezza has already reached 15,000 and 10,000 units a month at NCR.
When asked, a company spokesperson had stated that other than Baleno other models were yet to be finalised.
MSIL saw its October sales go in slow lane, primarily plagued by capacity constraints. The company clocked a 2.2 per cent year-on-year rise in overall volumes during the month.
An MSIL spokesperson had told Business Standard earlier in August, "Our plants are running to full capacity. Our combined capacity is 1.55 million cars a year at the plants in Gurgaon and Manesar in Haryana. This can at best be stretched to 1.57 million."
Maruti Suzuki has plans to sell 2 million of the 5 million cars expected to be sold in India by the year 2020. In 2015-16, 2.02 million cars were sold in the country and 1.3 million were made by Maruti Suzuki.