Maruti may invest up to Rs 18,000 crore in Gujarat

The country's largest car maker, Maruti Suzuki India, on Tuesday said it, along with vendors, could invest up to Rs 18,000 crore (Rs 180 billion) in Gujarat as it looks to produce about 20 lakh (2 million) units in the long run in the state.

The company's top executives, including chairman R C Bhargava and managing director Shinzo Nakanishi, met Chief Minister Narendra Modi in Gandhinagar on Tuesday to expedite setting up of its manufacturing foothold in the state.

MSI is looking at a phased manner of starting car production in the state.

"First phase of production would be of capacity of 1 million cars, which would take approximately five years to install. At current cost, that would entail an investment of Rs 6,000 crore (Rs 60 billion)," Bhargava said.

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In the second phase, he said if the market continues to grow and there is scope for further expansion, "we would do another million cars with corresponding investments."

"Along with that, we would get all the vendors, suppliers to come here and their investments would also be of the order of about Rs 6,000-odd crore," Bhargava added.

He, however, added that the company has not finalised plans yet to set up its manufacturing base in the state.

"We came to explore the possibilities of coming in the future to Gujarat. The attitude of the chief minister and the government of Gujarat has been very, very positive and for that reason, Gujarat certainly is a very strong probability for our future selection for expansion," he said.

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Official sources, however, had said MSI has zeroed in on a location near Sanand out of three offerings -- Sanand, Halol and Dholera.

Bhargava said another main reason for exploring Gujarat as an option is due to the close proximity to the Mundra port that will help save logistics cost while exporting.

If MSI decides to set up shop in Gujarat, then the unit will be the company's 7th production plant and its biggest ever investment outside Haryana.

While the existing plant in Manesar can produce 3.5 lakh (350,000) units annually, its three units in Gurgaon have a combined annual capacity of 8.5 lakh (850,000) units.

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At present MSI, which is 54.2 per cent owned by Suzuki Motor Corp, is setting up two new units with an annual installed capacity of 2.5 lakh (250,000) units each inside its Manesar facility at a total investment of Rs 3,625 crore (Rs 36.25 billion).

Once the new units in Manesar become operational by 2012-13, the company's total production capacity will go up to 17 lakh  (1.7 million) units annually from 12 lakh  (1.2 million) units per year at present.

Besides fresh investment at Manesar, MSI is investing Rs 2,500 crore  (25 billion) for its K-series engine plant and setting up a dedicated R&D facility at Rohtak.

In 2010-11, the company's total sales soared 24.81 per cent to 12,71,005 units from 10,18,365 units in the previous fiscal.

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Domestic sales increased by 30.08 per cent to 11,32,739 units from 8,70,790 units in the previous fiscal.

MSI's passenger car sales during last fiscal jumped by 26.24 per cent at 9,66,447 units from 7,65,533 units in FY'10.

However, its market share in this segment fell to 48.74 per cent from 50.09 per cent in 2009-10.