Suzuki invested ₹ 9,000 crore to build a new car factory in Gujarat



The investments for the construction of the new car factory are made in the Ahmedabad district, close to the existing Suzuki plant in the Hansalpur-Vithalpur area. Photo: Ramesh Pathania / Mint

The investments for the construction of the new car factory are made in the Ahmedabad district, close to the existing Suzuki plant in the Hansalpur-Vithalpur area. Photo: Ramesh Pathania / Mint

Suzuki Motor Corp plans to invest at least ₹ 9,000 crore to build a new car plant in Gujarat, said three people with expert knowledge. The investment will double the annual capacity of Suzuki in Gujarat to 1.5 million vehicles, underlining the ambitious plans of the Japanese car manufacturer for India, where its unit, Maruti Suzuki India Ltd, is the market leader.

The infusion of new funds would increase Suzuki's combined investment in India by up to 30,000 crore. Suzuki will use the money to build three assembly lines with a total annual capacity of 750,000 vehicles, an engine production unit, purchase land, build a full research and development center (R & D) in Rohtak (Haryana) and a lithium-ion battery in Gujarat in collaboration with Denso Corp. and Toshiba Corp.

Suzuki's focus on the largest bastion, India, follows the decision of the car manufacturer to withdraw from major markets such as the US.

Nikkei Business On August 23, Suzuki reported that it is also withdrawing from China, which would mean that the company will not be present in the world's top two car markets.

In addition to the factory in Gujarat, factories owned by Maruti Suzuki in Haryana currently produce about 1.5 million units per year. The new expansion would therefore bring Suzuki's total production capacity to 3 million units in the country.

To be sure, Suzuki's investment does not include that of Maruti Suzuki, who spends approximately ₹ 5,000 crores each year on investment expenditures and on the purchase of parcels across the country.

The investments for the construction of the new plant will be made in the Ahmedabad district, close to the existing Suzuki plant in the Hansalpur-Vithalpur area, according to two Gujarat government officials.

"The company recently bought a piece of private land where it plans further expansion, and the total capacity of Suzuki in Gujarat will reach 1.5 million vehicles once these two projects are completed," said one of the two government officials, asking for anonymity.

A Suzuki CEO, who does not wish to be named, said the company will invest ₹ 9,000 crore in the state to expand capacity. A spokesman for Maruti Suzuki did not respond to an e-mail that was looking for comment.

Suzuki carries out its investments in Gujarat through its unit, Suzuki Motor Gujarat (SMG), which has a contract production agreement with Maruti Suzuki, in which it delivers cars at cost price.

The pact is valid until 2030.

The state officials said the company will add another 250,000 units of capacity to the existing plant in Gujarat in the coming months before it is expanded to 750,000 by 2020.

After 2020, the company will roll out vehicles from the new facility, they said.

Suzuki controls 51% of the Indian car market via Maruti Suzuki, which means that it sells every second car in the country.

Net profit at Maruti Suzuki has doubled over the past three years and has been generating approximately ₹ 2000 crore in net profit on a quarterly basis. The unit now contributes more than half of Suzuki's consolidated profit from about 30% six years ago. The expansion of Suzuki will create more jobs in Gujarat, the home state of Prime Minister Narendra Modi.

"Gujarat is the largest hub for Suzuki, both in terms of investment and capacity," said the second state official. "The company directly employs at least 4,000 people in the state and will provide overall direct and indirect employment for approximately 25,000 to 30,000 people in the future."

The Sanand-Hansalpur belt has developed in the last decade as an automobile and industrial hub after Tata Motors Ltd moved the factory to the area in 2008 after violent protests in the Singur in West Bengal. The area is expected to create employment for 100,000 people in the coming years, said the same official.

The belt is part of the Delhi-Mumbai Industrial Corridor project, a joint venture between the Indian and Japanese governments. A Japanese industrial park and a township for Japanese workers are also planned in Gujarat by the government.

Maruti Suzuki has set up a skills development initiative called Japan's Institute for Manufacturing in Gujarat.


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