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Maruti Suzuki India Ltd (MSIL), India’s largest carmaker, is mulling a short-term ramp-up in capacity at its plant in Manesar, Haryana to meet demand, the company said in its quarterly earnings call. The ramp-up—which could be realized by April 2024—is expected to act as a stopgap measure until its new facility at Kharkhoda near Sonepath is ready for production. The company has an incremental capacity of 22.5 lakh units from its facilities in Haryana and Gujarat It made about 31%, or 1,62,000 units, this quarter from the Gujarat facility – directly owned by Japan’s Suzuki Motor Corporation.
“Probably, we may have to add about one lakh capacity at Manesar on a short-term basis to meet medium demand. One lakh at Manesar may come up in April ’24 and Kharkhoda next year,” said Rahul Bharti, executive officer (corporate planning and government affairs). According to him, the first production plant at Kharkhoda plant is expected to have an annual capacity of 2.5 lakh units. MSIL currently rolls out MPVs like the XL6 and Ertiga from its Gurugram facility and models across segments like the Alto, S-Presso, Celerio, Brezza and Dzire from its Manesa facility.
Bharti has also rejected any demand to cut production at the Gurugram plant—also the carmaker’s oldest facility. “We are not looking at any curtailment in Gurgaon, in fact, at least in the short term, we may have to ramp up production in Gurgaon. Our first plant (in Kharkhoda) should be commissioned by the first quarter of calendar ’25. And I think if demand continues to grow in India We already have to start thinking about the second plant,” he explains.
MSIL intends to pull out all stops to fill its huge 4.1 lakh order book by September. “Mostly, we’ve seen the Ertiga have a high waiting list and anecdotally you tend to get requests for early allocation. Of course, the newer models we’ve discussed, the Baleno, is higher, and then the other models are mostly evenly spread.” Bharti says. CNG vehicle order book is around 1,30,000-1,40,000 units. However, the company identified significant CNG price hike as a headwind. “Fortunately, the price hike has not had any impact, but the high prices are cause for concern and we have presented the matter to the government.”
MSIL recently unveiled the CNG variants of the Baleno and XL6, and according to Shashank Srivastava, senior executive officer, marketing and sales, MSIL, the carmaker would have launched the new models much earlier had there not been enough order books for CNG. . “Our priority was to increase semiconductor supply for CNG and meet existing demand,” he said at a press conference after the company’s quarterly results. Meanwhile, Bharti says that during this quarter, MSIL witnessed over 20% penetration. “But we are engaging with the government to rein in prices as it has nothing to do with Indian consumption. It is only linked to a global index, which has a force majeure type of situation,” he added.
The company also revealed plans to spend over ₹7,000 crore on capital expenditure this fiscal. “This includes the Kharkhoda facility where we have now started our construction. And, we have to place orders with various vendors. So, that will be a big part of the capex. Besides, all the new models we launch. Where our tooling, etc. To invest, I think it will be another big chunk of capex,” explained Ajay Seth, CFO, MSIL.
Bharti also says that the SUV segment is contributing significantly to the company’s EBIT margin. “The biggest advantage was that it is a premium offering in the SUV space. And what we are excited about is that a fair percentage of bookings are in the higher variants. And that is for both the Grand Vitara and the Brezza. So, a very good percentage of the bookings are from the upper or top variants. So, it’s positive. And once we have volume and we have presence in this segment, profits automatically follow,” he explains.
Even so, Sheth said that at this point, it is difficult to comment on profitability, as the company continues to expand its presence in the SUV market. “In the past, as the portfolio was small cars and we were not present in the SUV segment, our profitability was reasonably good.” He further added that the profitability of MSIL depends on many factors, which work in tandem with each other. “It’s a combination that the market can absorb, where you can price your product and also, when the product matures over a period of time and when you localize and costs come down, things change in that interim period.”
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