Maruti Suzuki India is kicking off ‘Maruti 3.0’ targeting to add another 20 lakh units-production capacity in nine years with about 28 different models in the market by FY31, according to the company’s Chairman R C Bhargava. Presently, the company has 18 models on sale in the Indian market.
As SUV sales continue to gain momentum in India with no prospects of demand for the smaller entry-level car market recovering to the growth rates of the past, the company, known for its small cars, is now restructuring its production facilities to “conform to the realities and what we are projecting for the future”, he said in his address to the company’s shareholders in the Annual Report for 2022-23.
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Bhargava also said while the Indian car industry is not expected “to grow in double digits, like what happened in China in the past, we do expect that a 6 per cent growth rate will be maintained till FY 2030-31”.
Highlighting the steps taken by the company to meet future demand, he said, “What is now being planned can be said to be the start of ‘Maruti 3.0’. Our first phase was when we were a public enterprise. The second phase ended with the Covid pandemic, and the Indian car market became the third largest in the world. The challenges before the company are unprecedented.”
He further said, “It took us 40 years to create a capacity of 2 million units and SMC (Suzuki Motor Corporation) helped in this process by establishing the Gujarat facility. Your company now has to add the next 2 million in a period of 9 years.”
Bhargava also hinted at possible structural reorganisation, saying the task of managing all the issues relating to the production of 40 lakh units a year “requires considerable thought and possible reorganisation of the structure of the company keeping in view the best interests of all shareholders as well as other stakeholders of the company. We will, as soon as possible, announce what we are proposing”.
Maruti Suzuki expects the demand for exports to continue to grow and export volumes are projected at 7.5 lakh to 8. Lakh cars by FY 2030-31, he said, adding the domestic plus export requirements have made it necessary for the company to add another 20 lakh units of manufacturing capacity.
“Work is progressing at the first site in Kharkhoda, Haryana, and it is expected that the first plant of 250,000 capacity will start production in the first half of 2025. Thereafter, one similar plant will be added each year to reach a capacity of one million. At the same time, we are in the process of selecting a second site for adding another one million capacity by FY 2030-31,” Bhargava said.
He, however, said the challenge is not only to produce 40 lakh cars a year and possibly higher volumes in the subsequent years but the company also has to sell this number of cars.
“By FY 2030-31, your company could have about 28 different models. Clearly, the organisation and systems for selling such a large variety of cars will require changes from what exists at present,” he said. At present the company has 18 models sold in the market.
Maruti Suzuki, known for its small cars, is now realigning itself as the demand for these vehicles continues to decline.
“Since there are no prospects of demand for the smaller entry-level car market recovering to the growth rates of the past, we are restructuring our production facilities to conform to the realities and what we are projecting for the future,” Bhargava said. However, he said despite the slowdown in this category hatchbacks and small cars will remain a very important part of the company’s total portfolio.
“The rate of growth of these cars is expected to be less than 2 per cent a year, but the industry volume is almost a million cars a year, with MSIL having a share of about 70 per cent,” he said, adding the company intends to do whatever is necessary to meet customer needs in this segment in the best possible manner.
Maruti Suzuki has “four very well-accepted SUVs in the market and (we) are on our way to assume leadership in this segment. We will gradually keep increasing our market share that had declined in the last 2-3 years”, Bhargava said.
On the growth prospects of the Indian car market, he said, “While we do not expect the car industry to grow in double digits, like what happened in China in the past, we do expect that a 6 per cent growth rate will be maintained till FY 2030-31.” In FY 2023-24, Bhargava said, Maruti Suzuki “expects to grow at a slightly higher rate. Along with the rising domestic demand, the prospects for exports are also expected to continue to improve. Our exports rose to 2,59,000 units last year.” He informed the shareholders that the development of electric vehicles is proceeding well at the Gujarat facility, and the company expects to start the sale of the first model in 2024-25.
“By 2030-31 we expect to have six EV models. These models are expected to comprise 15-20 per cent of our total sales by that time,” Bhargava said, adding the conditions in India require that the attainment of carbon neutrality in the transportation sector should be achieved by a mix of technologies that are appropriate to the country’s resource endowment and economic conditions.
He stressed the usage of hybrid technology, ethanol, compressed biogas and CNG in cars, saying it “will all lead us faster to our goal of reducing the carbon footprint than relying only on any one technology”.
While the company posted record turnover and profits last fiscal, Bhargava said semiconductor shortages still impacted production but to a lesser extent. “I expect that during the current year, there will be further improvements, though normalcy in supplies will still not be achieved,” he said.
