News: Maruti gears up to sell 1 m cars a year

(TT 06/09/2006) New Delhi - Maruti Udyog has set a target to sell one million cars annually by 2010. At present, the country’s largest carmaker sells a little over half-a-million units a year.

Riding on an investment of Rs 6,000 crore, Maruti will launch five models in as many years and expand its manufacturing and sales network to achieve its target of doubling sales in four years.

“The company is aiming to sell one million cars per year by 2010. Investment in new facilities and in research and development are part of the strategy to achieve the goal,” Maruti chairman S. Nakanishi said at the company’s 25th annual general meeting here today.

Regarding the new models, he said, “This will be over and above face-lifts of existing models and launch of variants.”

“Besides increasing the number of outlets, the company will revamp the infrastructure and service at these outlets,” Nakanishi added.

The company wants to remain debt-free as it plans to fund expansion through internal accruals.

“We would like to be a debt-free company and, therefore, most of the new investments will be through internal accruals,” Maruti managing director Jagdish Khattar said even as he declined to respond to queries on demands of bonus shares.

Outlining the Rs 6,000-crore investment plans along with parent Suzuki, Maruti said the money would be used to set up a car plant, a diesel engine and transmission facility, upgrade the existing plant and launch models.

On Maruti’s diesel engine plant, Nakanishi said it would begin production this fiscal. “The plant will make 1.3-litre diesel engines for cars. It will have an initial capacity of one lakh diesel engines per year.”

According to officials, Maruti will launch an export model during 2008-09.

“This compact car model, while serving the Indian market, would be for export mainly to Europe. “The company will set a target to export one lakh units of this model annually,” he said.

The alliance between Suzuki and Nissan for synergies in manufacturing will help Maruti, said Nakanishi. “The increased scale of operations on account of the Nissan contract is likely to improve cost and quality competitiveness at the Maruti facilities, which in turn will benefit customers in the domestic market,” he said.

Suzuki and Maruti are also increasing collaboration in research and development. “Suzuki sees a major role for Maruti in R&D for cars in Asia.”

“The talent will be on tapping the vast pool available in India and develop people through extended training at Suzuki Motors Corporation, Japan. This, combined with augmentation of R&D facilities, will help Maruti acquire a pre-eminent position in Suzuki’s global research and development set-up,” he said.

According to Nakanishi, the Indian car market is on the threshold of an explosive growth trajectory with positive macro-economic factors, including GDP growth, bias towards lower taxes, a young population and focus on road and rural infrastructure development.