India’s largest car-maker Maruti Suzuki India has finalised a deal to buy diesel engines from Italy’s Fiat. Fiat will supply up to 1 lakh diesel engines per year to Maruti. With this deal Maruti plans to raise Swift hatchback output from January 2012.
Last week, Maruti Chairman, R C Bhargava said that recent rises in petrol prices have boosted demand for diesel cars, but Maruti did not have capacity to meet the demand.
Earlier this month, Maruti raised diesel car prices by up to Rs 10,000 rupees, taking advantage of the demand for the segment as input costs continue to go up. “We have a waiting list of diesel cars and we have surplus capacity of petrol cars,” Bhargava said.
Maruti, which until last year sold nearly every other car in India, now faces tough competition from global car makers such as Hyundai Motor Co, Ford Motor Co, General Motors Co and Honda Motor Co and has seen its market share slide to just over 40 percent.
Maruti, which has installed capacity to make about 1.5 million cars a year, is expanding one of its existing plants to reach 1.75 million annual capacity.
The company is in the process of buying land to build a new factory in Gujarat, but will start work at the plant depending on the demand scenario and when it feels it needs to expand capacity beyond 1.75 million, Bhargava said.
Maruti, 54.2-percent owned by Japan’s Suzuki Motor Corp reported a more than halving of its quarterly net profit, wider than industry estimates, hit by labour unrest at Manesar plant and rising interest rates in Asia’s third-largest economy.