Hoping that 25 million two-wheeler buyers of last five years would upgrade to cars, India's largest car manufacturer Maruti Udyog Ltd [Get Quote] on Friday said it was all set to cater to them and roll out diesel cars by 2006-end.

"The diesel car market has been growing in India in recent years. Suzuki Motor Corp is known for petrol engine technology and does not manufacture diesel engines. It obtained diesel engine technology largely to meet the requirements of Indian customers," MUL Chairman S Nakanishi told the company shareholders.

He said the diesel engine plant would come up by end of 2006, strengthening Maruti's leadership in passenger cars.

The company plans to make investments in a new car plant and an engine and transmission plant in Manesar, Haryana.

"The existing manufacturing facilities are operating at close to peak capacity. The new car plant will augment production and help in meeting the higher anticipated demand," he said but did not give details of investment planned.

Maruti, which currently has production facilities to manufacture 600,000 cars a year, reported a 19.7 per cent growth in sales to Rs 11,353.8 crore (Rs 113.538 billion) in 2004-05 while profit jumped 57.5 per cent to Rs 853.6 crore (Rs 8.536 billion).

The firm has drawn out ambitious programme for new model launches in the next five years, he said but did not elaborate. "Fresh investments to upgrade the existing facilities are also part of the investment plan," Nakanishi said.

Nakanishi said Maruti was Suzuki's largest overseas operation. Suzuki is assisting Maruti in improving productivity and reduce cost and is also collaborating in developing research and development capabilities.

"There is now a core group of engineers in Maruti who have undergone advanced training in Suzuki Motor Crop on a long-term basis. These engineers acquired capability in various facets of car design and development. The face-lift of Maruti's existing models over the past two years has been undertaken by these engineers independently," he said.

Nakanishi said Suzuki plans to make India its research and development hub for Asia outside Japan.

"We believe that the low penetration rate of cars in India presents a tremendous opportunity for growth. Both Suzuki and Maruti believe that India's car market is at a point of inflexion from where it will achieve a sustained satisfactory growth in the medium term," he said.

Much of this growth will be in the entry-level segment, as the nearly 25 million Indians who bought two-wheelers in the past five years upgrade to four wheels.

"(Maruti) is in an excellent position to tap this opportunity," he said.

Compact cars are the area of strength of Suzuki Motor Corp, it has been the leader of the mini car market in Japan for over three decades. It has the right technology and the right products to utilise the opportunities that are likely to emerge in India in terms of growth in demand for compact cars, he said.

"The expansion of our company's sales and service network, our aggressive cost reduction and productivity improvement programme, our tie-ups with finance companies and banks to expand the reach of organised finance, are all efforts to reach out to Indian families that are yet to buy their first car," he said.