Maruti Suzuki bets big on diesel cars

Maruti Suzuki India today said it is "examining" having more diesel engine capacity than it has currently planned in order to have an overall 40 per cent market share in the domestic passenger vehicle market.

"If we want to have 40 per cent of market share, we would have to have more diesel cars and engines," Maruti Suzuki India (MSI) Chairman R C Bhargava said.

Addressing shareholders during the annual general meeting of the company, he further said, "If people are having 80 per cent of their sales in diesel, we cannot be a predominantly petrol car maker".

For the period April-July this fiscal, MSI's share in the domestic passenger vehicle market stood at 38.61 per cent at 3.34 lakh units, as per Society of Indian Automobile Manufacturers.

Talking about the company's future plans on diesel engines, Bhargava said: "By 2014, we should have a total capacity of 7 lakh diesel engines. We are also examining if we would need more diesel engine capacity after that if the (fuel) policy remains as it is today".

He said with the ever increasing gap in the prices of petrol and diesel fuels, the demand for diesel cars have soared while that of petrol has gone down, leading to an overall decline in car sales.

In order to meet its requirements, the company is setting up a diesel engine plant at Gurgaon with an investment of Rs 1,700 crore. It will start production next year with an initial capacity of 1.5 lakh which would go up to 3 lakh by 2014.

Besides, the company is sourcing one lakh diesel engines from Fiat in India. It already has three lakh engines available from Suzuki Powertrain India Ltd, which has been proposed to be merged with itself.

He, however, said there was an uncertainty due to lack of a proper fuel pricing policy stating, "We don't know where it will be (in future)" referring to the price gap between petrol and diesel which currently stands at around Rs 27 per litre in Delhi.

Commenting on the overall market situation, Bhargava said due to a lot of global and domestic factors such as eurozone crisis and rupee depreciation, sales are sluggish.

"Earlier we were expecting the industry to grow at 10 per cent but it is unlikely now. The current estimate is about 8-8.5 per cent," he added.

Bhargava further said in order to lessen the impact of forex fluctuation, the company and its vendors have embarked on a drive to reduce imports.

"In the next 2-3 years we should see a significant decline in the forex cost of imports," he said.

MSI Managing Director and CEO Shinzo Nakanishi said the company is planning CNG variant of its small car Alto K10.

Also Read: Maruti may double capacity at its planned Gujarat plant: Report