Largest car maker sees no reason for cheer in FY14

Written by fe Bureau | New Delhi | Updated: Dec 23 2012, 05:30am hrs
Maruti Suzuki expects car sales to continue to be sluggish in 2013-14 as well, on the back of slowing economic growth and uncertainty on government policies. Top company officials said on Saturday the car market leader will end FY13 with a 6% growth, and is looking at a similar modest rise in FY14.

Maruti chairman RC Bhargava said, The next year will be very difficult. We dont see a double-digit growth and 6-7% is the best we can hope for. Itll be the election year, so no strong initiatives are expected. This year well end with a 6% growth over last year, which wasnt very great either."

The countrys largest car maker also said it will not enter the premium segment of passenger cars in India and will protect its image of a small car manufacturer. The company said it has started spadework to set up its second facility in Gujarat with acquisition of another 600 acres, in addition to its existing plan to invest Rs 4,000 crore for setting up a plant in the state.

We have land at two locations in Gujarat. The first one is offered by the government and the second one is private land that is directly acquired by us with some negotiations by the government," Bhargava said, adding, The second location is for our future expansion. Once we exhaust the capacity at the first site, we will move to the second one." He, however, did not share details such as when the firm is likely to start construction at the second site.

When asked if MSI is shifting its focus from Haryana, where it has recently witnessed severe labour unrest, Bhargava said: We are not moving away from Haryana. We have two plants in the state and are going to Gujarat after utilising the capacity completely at Gurgaon and Manesar. We will do the same once we exhaust the capacity in Gujarat also." He said the company will do the ground breaking ceremony for the Gujarat facility early next year.

Commenting on exports, MSI managing director and CEO Shinzo Nakanishi said MSI is finding it tough due to the decline in European market. Last year we had a total export of 1.27 lakh units. This year we may be a little less than that because of the slowdown in Europe, which used to be our biggest overseas market."

MSI has been exploring new markets to keep its overseas sales momentum, Nakanishi said. Bhargava added: I dont know when the European market will revive but we have been entering new markets like Algeria, which is one of our biggest now and we expect to sell around 25,000 units there."

The company has also been exporting both completely built units and completely knocked down units to Indonesia, amounting to about 40,000 units.

On the Sri Lankan market, Bhargava said sales have fallen by almost 50% this year due to the increase in import tariffs by the government there.

Asked whether the company would look to set up assembly operations overseas, he said: It is possible in the course of next few years that we have overseas assembly operations in the markets where we are looking.

These overseas assembly plants could be run by Maruti directly and not by Suzuki Motor Corp, he said, adding, however, that at the moment there are no such plans to set up assembly operations anywhere.

On the companys plans to enter premium segment of Indian passenger car market, Bhargava said: Maruti and Suzuki Motor grew and became profitable on the basis of small cars. Small cars in India is going to be a big segment in future also. MSI has the image that it is first class small car maker and I would try to protect that image.

He also ruled out MSI diversifying into the commercial vehicle segment.

Asked about the progress at the violence-hit Manesar plant, Bhargava said the production has reached normal level of about 1,900 units per day. When asked if the company would reconsider to take back some of the workers that were fired after the violence in, he replied in the negative.