Interestingly, the plant will come up near Sanand home to Tata Motors Nano plant. A government source said the project is an attempt by the state government to develop a cluster of top auto companies on the lines of Detroit, US. Apart from the Tatas and now Maruti, General Motors has a light commercial vehicle plant at Halol in Gujarat.
The plant, expected to be up and running by 2015, would cater mainly to export markets and have an initial capacity of 2.5-3 lakh units. The move is seen as an attempt by Maruti to reduce its dependence on Haryana and diversify operations across the country. While state government officials confirmed the development, a Maruti spokesperson declined to comment.
Gujarat has a very strong manufacturing base. The government was very prompt in inviting the Tatas after they had to pull out of West Bengal in 2008. Maruti has been looking at Gujarat since then, the source said. Media reports too have recently said that Maruti was interested in setting up operations in Gujarat but the current weak investment climate in the economy has been a dampener in setting a timeline. The source said that in the last few months, there has been a series of communications and a final announcement could be expected soon. The plant is likely to build the A-Star, Estilo and Swift. Currently, Maruti only exports the A-Star. In 2010-11, Maruti exported 59,450 A-Stars to Europe.
At present, Maruti Suzukis capacity is 1.2 million units at its two facilities in Gurgaon and Manesar. The company, which has three assembly lines at Gurgaon, is setting up two more in Manesar which would be operational by 2012-13. This would raise the total installed capacity to 1.7 million. By the time the Gujarat facility comes up, capacity would easily cross 2 million units.
In 2010-11, Maruti Suzukis sales jumped nearly 25% to reach 1.2 million units as compared to 1.01 million in the previous year. During the fiscal, the company exported 1.38 lakh units with Europe constituting over 40% of the exports down from 77% in the previous fiscal. The company has been exploring new export markets in Malaysia, Vietnam, Laos, Brunei, Algeria, Chile, Indonesia, South Africa, Hong Kong and Australia. This focus resulted in increased contribution from non-Europe markets to 57% as against 23% in 2009-10.
Having an operation in Gujarat will give Maruti multiple benefits. The state has excellent port facilities and provides a good investment environment, an industry source privy to the development told FE. He said that apart from Maruti, other OEMs were also discussing opportunities with the state government.
Gujarat bagged its biggest auto project when Tata Motors was forced to quit Singur following a land row. Tata invested R2,000 crore to build the Nano factory in Sanand in a record time of a little over one year. To co-opt its vast vendor base, Gujarat allowed Tatas to buy land on behalf of them and sub-lease it. The Tatas bought land for its vendors at R2.5 lakh per acre with an external development charge of R50,000 per acre on a 20-year-lease.