Maruti board to decide on Gujarat project next week amid low demand

Maruti Suzuki India Ltd would decide on its investments plan for a third facility in Gujarat at a board meeting next week, amid a sales slump in the home market.

R C Bhargava, chairman, said: “The board will evaluate the market conditions and decide when to commence work on the project.”

Maruti Suzuki was allotted 700 acres by the Gujarat government for its third manufacturing unit, near Mehsana, in June last year.

The company had planned investment of Rs 4,000 crore (Rs 40 billion) to make operational the facility, with an initial capacity of 250,000 units by 2015-16.

MSIL had, however, not specified when it would commence work on the unit.

Earlier this year, it had additionally acquired around 700 acres of land in Vithlapur to set up a second unit in the state, which would nearly double its annual production capacity to three million units on complete commissioning.

“Even if we were to start work now (near Mehsana),

it would take about three years to commission the project.

"It is very difficult to forecast how the market will be in 2015-16.

"Till 2014-15, we have to rely on Gurgaon (600,000 units) and Manesar (also in Haryana, 850,000 units).

"At present, we are producing about 1.2 million vehicles (a year),” Bhargava added.

Meantime, the company is on track to commission its third assembly line at Manesar next month.

Then, the capacity at Manesar could go up to an optimum of 850,000-900,000 units annually.

The board meeting to decide on investment plans in Gujarat comes at a time when passenger car sales in the domestic market have declined for a ninth straight month.

In the first four months of this financial year (April-July), passenger vehicle sales have dropped by 7.5 per cent over a year, to 793,708 units.

The company had cut production by two per cent this financial year to 367,680 units till July.