Suzuki on Rs 860 cr expansion drive

Company's new Manesar plant will churn out 250,000 cars.

Suzuki Motor Corporation has lined up investments of $191 million (Rs 860 crore) to ramp up capacity in its Indian subsidiary Maruti Udyog Ltd. While Rs $91 million (Rs 410 crore) will go into a new diesel engine plant with a capacity of 100,000 units, the company is expected to invest another $100 million (Rs 450 crore) in a 250,000 cars per annum assembly plant at Manesar in Haryana.

Suzuki Chief Executive Osamu Suzuki said at a news conference in Tokyo that the output from the engine plant would eventually exceed 100,000 a year, reaching as many as 250,000 a year.

"I think demand in India alone could reach 200,000 units, while strong export demand could be expected from Pakistan, Indonesia and maybe China," he said.

The diesel engine plant will be set up by a 100 per cent Suzuki subsidiary, tentatively named Suzuki Engineering India Ltd.

Scheduled to start production by the end of 2006, the plant will make 1,300 cc, four-cylinder engines. Suzuki had earlier signed a product licence agreement with Fiat of Italy and Adam Opel AG of Germany to make these engines.

Maruti has been importing diesel engines from Peugeot of France for its Zen and Esteem cars, though it does not sell diesel cars in large numbers.

Suzuki Metal India, a 51:49 joint venture between Suzuki Motor Corporation and Maruti to make aluminium castings, will be merged into Suzuki Engineering India Ltd.

Suzuki, in which General Motors has a 20 per cent stake, also announced that it would form a joint venture with Maruti called Suzuki Maruti India Ltd which will set up a car assembly plant in Manesar with a capacity to produce 250,000 cars a year. Maruti's Gurgaon plant can produce 500,000 cars per annum.

Suzuki did not disclose the investment in this plant but Osamu Suzuki noted that it generally costs about $100 million to build a plant to produce one model.

He added that the facility would include a test course, suggesting that the company is likely to spend more than that. The Maruti board is yet to take a decision on the investment.

Manesar has also been chosen by Suzuki for its motorcycle plant. The company earlier had a joint venture with the south-based TVS group to make two-wheelers.

But the two partners split and Suzuki subsequently set up a 100 per cent subsidiary in the country called Suzuki Motorcycle India Pvt Ltd (earlier named Integra Overseas Pvt Ltd).

Suzuki has set up a six-member all-Japanese project team to execute comprehensive preparatory work related to the three projects: diesel engines, assembly lines for cars and for motorcycles.