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Maruti is advancing expansion deadlines |
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Daily News & Analysis
New Delhi: Anticipating a surge in exports and perhaps also to meet
competition coming in the form of Tata Nanos production numbers, Maruti
has decided to complete the one million unit capacity expansion planned
for the next fiscal by October this year.
In fact, by 2010 Marutis total production capacity will jump to 1.2
million units, of which at least 2 lakh will be fed to the export
markets.
While acknowledging that the company has become aggressive on capacity
expansion, a Maruti spokesperson said this was being done to meet
enhanced export demand and involved no fresh investment from the
Japanese parent.
Suzuki Motor Corp has already announced Rs 9,000 crore for capacity
expansion and research & development till 2010.
The company is already committed to producing about 2 lakh units of the
new car A Star by the turn of the decade besides a specified number of
units of the Splash. Of this, at least 1.5 lakh units of A Star are to
be exported under Suzuki and Nissan badges by 2010 so that the overall
export target that year and beyond could be well over two lakh units.
Not just exports, experts said the impending launch of the Nano could
also be a factor in Marutis capacity expansion push.
If projections on Nano numbers by some global think-tanks are correct,
Tata Motors may leave Maruti behind in production capacity and hence
also market share over the next 4-5 years.
Meanwhile, in their comments on Maruti on Friday, Jamshed Dadabhoy and
Hitesh Goel of Citigroup Global Markets Research noted that capital
expenditure ahead of schedule was a positive development.
Given that there was an element of concern that Maruti would experience
a capacity shortfall into mid-2008 and consequently lose market share as
production would be insufficient to meet domestic demand. From a
financial perspective (however) it is a marginal negative, as our
earnings forecasts (FY09/10E) will have to be revised to incorporate new
depreciation assumptions.
By October this year, the Manesar plant will be capable of producing
three lakh units against the current 1.4 lakh while the Gurgaon plants
capacity at peak utilisation would be around seven lakh units. Dadabhoy
and Goel has estimated continued good run for Maruti, pegging compounded
annual sales growth at 17% for the next two years even though margins
would remain under pressure due to higher input costs and a shift in
product mix toward exports, whose margins are low. |
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