Maruti goes slow on new plant amid sluggish sales

NEW DELHI: Maruti Suzuki has decided to go slow on land acquisition for a planned Rs 35,000-crore second factory in Gujarat due to poor growth in car sales. This factory was aimed at taking the company’s production capacity to four million (40 lakh) units by 2030-31.
When asked whether the company has gone slow on the project, Maruti chairman R C Bhargava said, “There is no delay, (but) there is no hurry about doing anything there because market growth is 1-2%. Why would I put up another million units in a hurry? Unless the market shows there is a need.”

Bhargava said Maruti has sufficient expansion work going in its present factories at Haryana and Gujarat. “I have enough capacity to come up in Kharkhoda (Haryana). Some are coming up in Manesar, (and) some are coming up in Gujarat’s first plant. There is no hurry about the Gujarat’s second plant. The site has not yet been finalised.”
The despondent mood at the country’s biggest carmaker highlights the worry in the broader car industry. The industry had enjoyed strong growth in the post-Covid period but is increasingly finding the going tough as higher prices of vehicles and uncertainties around the economy and stock markets are keeping buyers away.
Companies are having a relook at new investment plans as they fear overcapacity may come to haunt businesses if the slowdown persists.
Bhargava said to kickstart demand, there is a need for govt support for creation of an all-new segment of entry-level cars – smaller than the Alto. This, he said, will prompt more two-wheeler buyers to upgrade to cars, something which is not happening today as car prices, even in the entry segments have gone up by around Rs 90,000 due to govt mandates on safety and emissions.
“There is an example of Japanese kei cars. They have different sets of regulations compared to other cars and taxes (on them) are much lower. They are smaller and cheaper and more affordable. That’s how Japan switched from two-wheelers to cars. We need to do a similar thing here.”
He added that developing a highly-affordable mini car is quite challenging, even for a mass-maker like Maruti, and thus there is a need for govt support. “Today no one can develop at that cost, not even the Chinese.”
On whether the income tax relief in the Union Budget will help in boosting car sales, he said it looks difficult as car prices have moved up substantially and people will also use the additional income for other household work. “People have other expenditure and will not use it (income tax relief) to buy cars. They have other priorities.”