Maruti Suzuki signs an agreement with Gujarat government to set up a new plant

A state-support agreement (SSA) was signed between the Gujarat government and Maruti Suzuki India Limited (MSIL) as the company want to set-up its third manufacturing plant and purchased land near Mehsana for the same. In order to procure 700 acres land and build its new manufacturing facility, the country's largest car maker plans to invest Rs. 4,000 crores. Maruti's ancillary suppliers are planning to invest similar amount to establish a vendor park near the factory.

With an initial production capacity of 2,50,000 units every year, the new plant is scheduled to be operational by 2015-16. Keeping in mind the demands in both domestic and export market, company will further plan the expansion of the capacity at this plant.

Managing Director (MD) and Chief Executive Officer (CEO), Maruti Suzuki India Limited, Shinzo Nakanishi, said at the signing ceremony, “As we take our first step in Gujarat, Maruti Suzuki is entering into a new phase of its business life. India has a bright future, wherein the auto industry is set to grow rapidly. Our plan for capacity expansion is to prepare for that growth even as the industry crosses over four million cars by 2015-16. Our new plant will take our combined capacity to two million units.” He further added, “We will generate direct employment of over 2,000 people. In addition, the ancillary units in the vicinity and supplier park will generate additional employment opportunities.”

The leading car maker is yet to grant its approval to the amount of investment and the capacity to be allocated to the new plant in the beginning. According to a company statement, “Maruti Suzuki’s Gujarat plant will be located around 100 km from Ahmedabad. The new facility is about 300 km from the Mundra port and hence would be well suited for company’s export initiatives.”

Over last couple of years, several car manufacturers have set bases in Gujarat, and MSIL would be the fifth company to join the bandwagon. Other companies with plants at Gujarat include Tata Motors and General Motors while Ford India and Peugeot Citreon are planning to invest Rs. 4,000 crores to establish plants at Sanand. However, in the light of low global sales, Peugeot Citreon shelved the idea in February 2012 to exercise cost cutting.

On the other hand, the largest car maker stated that at its current operational Manesar plant, it will keep investing to raise the capacity. Company was planning to initiate a Manesar C plant, a third assemble line with annual capacity of 2,50,000 units, by mid 2013-14. By 2015-16, MSIL will be able to raise its production to 2 million units in all of its plants at Gurgaon, Manesar and Mehsana.

In order to set up its first manufacturing plant outside Haryana, Maruti India announced its plans to purchase 1,000 acres of land in May 2011. To generate production of one million units by the year 2015, car maker was supposed to invest nearly Rs. 6,000 crores. Including the investment by component suppliers to set up a vendor park near Maruti Suzuki’s Mehsana unit, the total investment was speculated to be approximately Rs. 18,000 crores. By 2020, the new plant was expected to roll out two million units every year.