Maruti Suzuki is likely to defer proposed investments in Gujarat as rising interest rates and fuel prices in a cooling economy force prospective buyers to retreat. The world’s second fastest growing market for vehicles has seen passenger car sales slump by 4 percent this fiscal.
“We may relook at our long time investment because of the slowdown,” RC Bharagava, chairman of Maruti Suzuki, said. “We are relooking at the timing of our investment. We may have to delay some of the investment by six months to a year.”
Maruti’s woes were compounded by a series of labour strikes early this year that crippled production at its key plants in Manesar in Haryana.
“We are worse off than the industry because we had the strike. We are trying to reach last year’s volumes; but we will end up worst than the industry by minus 5-8 percent,” Bhargava said.
Bharagava said the company would have a better idea of the investment and timeline of its Gujarat expansion after the Union government presents the budget for 2012-13 in February.
He, however, said Maruti would go ahead with planned investments of Rs 3,000-4,000 crore in its existing plants, a new unit in Manesar, research and development, and in setting up stockyards across the country. Bhargava said Maruti’s production facility in Gujarat would come up only when the capacity of its Manesar and Gurgaon plants was fully utilised.
The carmaker has two plants in Manesar and one in Gurgaon, with a collective capacity to manufacture 1.2 million vehicles annually. The third plant in Manesar will take the carmaker’s production capacity to 1.7 million units.
An executive close to the company said going by the sluggishness in the sector, it would be a tough call for Maruti to sell one million units this fiscal.