Maruti Suzuki India Ltd's ( MSIL) total investment will go up to Rs 6,125 crore during the next three years ( 2010- 13) with Suzuki Motor Corp chairman Osamu Suzuki announcing on Tuesday that the company would pump in Rs 1,925 crore to set up a third manufacturing plant at Manesar.
Addressing shareholders at the company's annual general meeting ( AGM), Suzuki said the new plant at Manesar will have the capacity to manufacture 2.5 lakh vehicles.
"Demand for cars in India has grown beyond our expectation. Some models we are not able to supply because of supply constraints," Suzuki said.
Suzuki said the new plant will take the total annual output of MSIL to 1.75 million units from 1.2 million units a year now.
The third plant at Manesar is likely to be ready by the end of finanical year 2012-13.
MSIL has already started work on the second plant at Manesar in which it is investing ` 1,700 crore. The plant will have an annual capacity of 2.5 lakh units.
Suzuki said the second plant at Manesar will be ready by January, 2012.
MSIL chairman R. C. Bhargava said the civil construction on the third plant at Manesar will also be carried out along with the second plant as this will help save costs.
"Ordering the plant and machinery will take more time, which is why it will come on stream later," he added. MSIL is also investing another ` 2,500 crore on an engine plant and research centre at Rohtak. These two investments were announced in March this year.
Bhargava also disclosed that MSIL would be holding talks with its parent company on settling the amount of royalty that has to paid.
The new models have been developed by Suzuki Motor Corporation and the Indian subsidiary has to pay a royalty to the parent company. At present, MSIL - which is 54.2 per cent owned by Suzuki - has an annual capacity of 8.5 lakh units at its Gurgaon plant, while the first plant at Manesar can produce 3.5 lakh units annually, with the overall capacity totalling 12 lakh units per year.
Suzuki said due to production constraints, MSIL has been unable to meet demand properly. "We have not been able to supply some of our models properly, as we have a lot of production issues. We had not estimated the demand for cars at which it has grown," he added. Besides adding new plants at Manesar, he said MSIL will also refurbish its three units at Gurgaon in a phased manner.
"Gurgaon is our oldest plant... The plant has since deteriorated and we need to modernise it," Suzuki said. The company also said it is looking at constructing regional offices at 16 locations.
Bhargava said the company will fund the `1,925-crore investment through internal accruals. He said the firm has annual earnings of `3,000 crore and cash reserves of `7,000 crore, which is sufficient to meet the investment needs.
Market leader MSIL has seen its market share fall below 50 per cent in recent months for the first time ever. The big ticket investments form part of the firm's plans to take on its rivals.
According to the Society of Indian Automobile Manufacturers (SIAM), the market leader sold 2,82,488 cars during the April-July period this fiscal, representing a 47.68 per cent share of the overall 5,92,405 units market.
During the same period last year, MSIL had a 53.13 per cent share in the 4,40,069 units car market, with sales adding up to 2,33,811 units.