Maruti Suzuki Board has approved the termination of the contract manufacturing agreement with Suzuki Motor Gujarat (SMG). Presently, Suzuki Motor Corporation holds 100% equity capital of SMG. The acquisition of 100% equity capital by Maruti Suzuki India (MSIL) from SMC is a related party transaction and is expected to be completed by FY24.
According to the Board of Directors, the decision was driven by the objective to improve efficiency in production and supply chain by bringing all production-related activities under MSIL.
The mode of acquisition including consideration to be paid to SMC shall be decided in a subsequent Board Meeting. Exercising the option to acquire the shares of SMG from Suzuki Motor Corporation (SMC) is subject to all legal and regulatory compliances including minority shareholders’ approval.
Suzuki Motor Gujarat is a wholly owned subsidiary of Suzuki Motor Corporation (SMC) which is a body corporate incorporated in Japan. The turnover of the SMG in the last financial year FY23 was Rs 31852.5 crore.
The management in an investor call clarified that this will not impact other agreement with Toyota as well as Suzuki’s India plans including setting up of battery plant.
According to the company statement, with the growth of the Indian car market and export potential, Maruti Suzuki India Ltd (MSIL) would need to increase its production capacity to about 4 million cars per annum by 2030-31, almost double from current levels. This would happen over several locations, some of which are known and some being studied.
On the other hand, given the carbon neutrality requirements, several powertrain technologies like EVs, Hybrids, CNG, Ethanol etc. will co-exist for a reasonably long period of time. Managing this scale and complexity of production with multiple powertrains, under different managements, would pose several challenges. In terms of actual production, logistics, sales and the cost thereof, there will be no change as the cars earlier supplied by SMG as a contract manufacturer, will now continue to be supplied as before.
