Maruti to build second car plant in Gujarat, will invest Rs 35,000 cr

New plant will have annual production capacity of 1 mn units; will start operation in 2028-29

Maruti Suzuki India plans to establish a car manufacturing plant in Gujarat with an annual capacity of 1 million units at an investment cost of about Rs 35,000 crore, it ann-ounced on Wednesday. Later, MSIL Chairman R C Bhargava said  the plant’s location is expected to be finalised in a few months.

Earlier in the day, India's largest carmaker and the Gujarat government signed a memorandum of understanding (MoU) for the new plant at the Gandhinagar summit.

"Both sides (MSIL and Gujarat government) are appreciative of the need for expediting the decision...coming to a conclusion (regarding location). We have a target of completing the construction of this 1 million units annual capacity plant by 2028-29, so it does require a start as soon as possible. So, there is an urgency about it. Otherwise we would not have put it in the MoU....This is an urgent matter where we could not afford delays," Bhargava said in a telephonic interaction with Business Standard.

 

The MoU encompasses two key aspects, explained Bhargava. First, Gujarat has been designated as the "preferred state" for establishing the new plant. Second, the production capacity of the company's existing Gujarat plant is slated to undergo an expansion, increasing from 750,000 to 1 million units per year, by introducing a new production line. The expansion will be done at a cost of Rs 3,200 crore and the new production line will be in operation from 2026-27.

"We have said in the MoU that Gujarat is the preferred state for location of the new facility to produce another 1 million cars a year. It is a preferred state, subject to availability of appropriate land,’’ he said. At the moment, both sides -- the government of Gujarat and MSIL -- are jointly working to see if an appropriate plot of land can be identified for the project, he pointed out.

On the timeline for finalising the location, Bhargava said: "As soon as possible and certainly, in the next few months." He reiterated that it has to be done in a matter of months.  

Elaborating on "appropriate land" in the MoU, Bhargava said: "In India, land is not an easy subject. Buying land is the most complicated thing. Legal processes, multiple sale deals, multiple owners claiming rights -- all kinds of things come during a land purchase by a company….. We want a land where we can work without having any fear of getting interrupted by any means -- legal or whatever else."

The investments were announced by Toshihiro Suzuki, President, Suzuki Motor Company (SMC), in the presence of Prime Minister Narendra Modi. SMC is MSIL's parent company.

On how the production of EVs and ICE (internal combustion engine) vehicles would be distributed at the plant, Bhargava replied, "EVs are yet to start. How the markets react to these vehicles --- all of this will be known two to three years from today."

"The fact that we have this full line available to us (at the existing Gujarat plant) means we can expand the production as per the market's requirement. At the Kharkhoda plant (Haryana), we can put an extra line just for EV production. At the existing Gujarat plant, we can convert a line for EV production. So, flexibility is there," he added.

MSIL currently has a total annual production capacity of 2.25 million units at its three plant--Gurugram and Manesar in Haryana and Hansalpur in Gujarat. It is also constructing a plant in Kharkhoda in Haryana and its phase 1 will begin next year with an annual production capacity of 250,000 units. The Kharkhoda plant will gradually be scaled up to have an annual capacity of 1 million units by 2030-31.

"Maruti Suzuki plans to secure a production capacity of approximately 4 million units in India by 2030-31 to prepare for future expansion of the automobile market in India. The new plant in Kharkhoda, Haryana, which is planned to start operation in 2025, the new plant in Gujarat and the fourth production line of SMG (company running existing Gujarat plant) will help achieve the milestone of 4 million," the company's statement noted.

In November last year, MSIL got the approval from its minority shareholders to issue shares worth Rs 12,841 crore to SMC for acquiring SMG (Suzuki Motor Gujarat), which runs the existing manufacturing facility in Hansalpur, Gujarat. MSIL entered this transaction to boost its production efficiency and streamline its corporate structure. SMG was supplying cars to MSIL under a contract manufacturing agreement signed in 2015.

MSIL is also establishing a battery manufacturing plant in Hansalpur, Gujarat, at an investment cost of about Rs 7,300 crore.

In order to prepare itself for the future, MSIL had on October 9 last year announced that it plans to invest approximately Rs 1.25 trillion in total capital expenditure (capex) between 2023-24 and 2030-31.