Maruti eyes deal to make diesel engines

India's biggest carmaker Maruti has said it could soon ink an agreement with one of the global engine makers it is in talks with, including France-based Peugeot, to produce diesel engines in the country.

"It (the agreement) should not take much time. The agreement will be signed this year," Maruti Udyog Managing Director Jagdish Khattar said.

Maruti, 54.2 per cent owned by Suzuki Motor Corp. of Japan, is in talks with a number of diesel engine makers, including Peugeot and troubled Italian automaker Fiat, to manufacture diesel engines locally.

Asked about the possible suitors, Khattar said: "We are talking to all the leading players."

On whether there could be a tie up with Peugeot, he said: "We are talking to many and it will not be proper to name any one."

At present, Peugeot, part of PSA Peugeot Citron group, supplies diesel engines for Maruti's compact car Zen and mid-size sedan Esteem.

Making engines locally made sense for the company as importing diesel engines was not cost-effective, he said.

It is believed that apart from Peugeot, Maruti is also in negotiations with Fiat for the project.

Earlier, a senior Suzuki official was quoted saying the Japanese automaker wanted to install Fiat diesel engines in Maruti models.

"I cannot give details at this stage as talks are still on. I can say the deal will be signed soon," he said.

Maruti, which has been named as an R&D hub for Asia by Suzuki, introduced a new-look Zen without tinkering with price late last year. The new variant was designed by Maruti's engineers in India.

With the company's deal with one of the global engine makers for producing diesel engines in the country, Maruti would be able to fit its Zen and Esteem models with the locally produced engines.

The move is aimed at making diesel engines more cost-efficient as importing them entails prohibitive costs.

Recording highest ever sales since inception 20 years back, Maruti posted a robust 30.3 per cent rise at 472,000 units during 2003-04.

In the first month of this fiscal, Maruti's sales surged by a robust 38.4 per cent at 39,838 units over 28,793 units in the same month last year.