Diesel car sales may have slowed down,but Maruti Suzuki believes that they are still the key to its growth. The car market leader plans to dedicate its third production line at Manesar largely to diesel models as it expects the share of such cars in total volumes to rise by at least 7 percentage points to 40% by next fiscal. Diesel engine output will also go up by 16% to 4.65 lakh,as it gears up to launch a new compact SUV and cater to the high demand for diesel variants of the Swift,Ertiga and Dzire.
RC Bhargava,chairman,Maruti Suzuki,said,Our production of diesel cars is growing compared with last year when we had a constraint of engine supply. This year,diesel car capacity is 4 lakh,which is a third of the total,and will go up to 4.65 lakh by next year. There is no problem in Manesar in terms of production as it makes most of the diesel models the Swift,Dzire and Ertiga still command waiting periods. Plant C at Manesar will start around September and the fresh diesel engine capacity will also be available around the same time. The Ertiga is not enough to keep our 40% market share,we need more diesel UVs.
The third production line will take Manesars annual capacity to around 8 lakh units,with Marutis total annual capacity (with Gurgaon plant) rising to around 15 lakh units. The company expects volume growth in FY14 to touch 5-7%,from around 5% this year.
He added,Gurgaon is essentially a petrol car producer,so we may have to reduce production further there in the last two years the industry has seen petrol car demand going down from 9.34 lakh (December 2011) to 6.45 lakh (December 2013). Maruti has already shut the Gurgaon plant two days in the last month due to rising inventory levels for petrol cars which today stands at around 5 weeks (three to four weeks is normal).
Marutis focus on diesel cars comes at a time when even diesel car sales have started declining on the back of rising fuel prices,high interest rates and depressed consumer sentiments. After posting 40-50% growth last year,diesel car sales rose 7% in December 2012,9% in January 2013 and fell 5% in February 2013. Even diesel cars have lost their high growth trajectory. The industry is cyclical and though some are predicting higher growth,we are yet to see that. Nothing has happened in Q4 (January-March FY13) that can justify a change. State governments have as much if not a bigger role than the Centre and let them not get off the hook and blame the Centre for all the problems. The negative factors will have to be offset with economic growth,for only if people have money left over in their pockets can they afford the rising cost of car ownership, Bhargava said.
He further said that passenger vehicles sales might be able to post a small positive growth this fiscal (because of strong utility vehicle sales),but there is not enough evidence to say that the next fiscal will be any better than the present. However,he was optimistic that growth can return to 8-10% from FY15 given the positive demographics of India and an expected rise in income levels on the back of economic growth. According to Siam,passenger vehicle sales have risen 4% to 24.29 lakh units in April-February FY13,though passenger car sales fell 4.64% to 17.14 lakh units in the same period. Car sales will post the first fall in a decade.
Slowdown does not mean negative growth and after FY14,we can get back to 8-10% growth. To cater to that we need the Gujarat facility where the first plant will be commissioned by end of 2015. For Suzuki,Japan has little scope for growth,so India will become an export base for Southeast Asia,Africa and West Asia, Bhargava said.