Maruti Suzuki to Raise India Capacity as Demand Rises `Beyond Expectation'

Maruti Suzuki India Ltd., the nation’s biggest carmaker, will boost production capacity 46 percent on surging demand in Asia’s third-largest car market.






Maruti will be able to make as many as 1.75 million vehicles annually after constructing new factories at Manesar, near New Delhi, said Osamu Suzuki, chairman and chief executive officer of parent Suzuki Motor Corp. Maruti can now build as many as 1.2 million vehicles a year.



The carmaker plans to spend 35 billion yen ($416 million) to build a factory in Manesar, Suzuki said, as economic growth stokes demand in a nation where industrywide sales may double by 2015. Ford Motor Co. and Volkswagen AG are also building plants and introducing new models in India, posing the biggest challenge yet to Maruti’s 50 percent market share.



“It will be good for the company if they can ramp up capacity as soon as possible,” said Umesh Karne, a Mumbai-based analyst at BRICS Securities Ltd. “If they don’t expand, the customer may choose another car brand.”



The company’s four existing plants in India now have a total installed capacity of 1 million vehicles a year. The carmaker is spending 17 billion rupees ($365 million) on its current expansion, to be complete by 2012. A new plant will begin output by mid-2013, Hideki Taguchi, a spokesman at Suzuki Motor, said yesterday.



‘Beyond Expectations’



“Demand for cars in India has grown beyond our expectations,” Suzuki said in New Delhi today. “Some models we’re not able to supply because of supply constraints,” he said at a shareholders meeting.



Maruti shares rose 1 percent to 1,315.40 rupees at the close of trade in Mumbai, compared with a 0.5 percent gain in the benchmark Sensitive Index of the Bombay Stock Exchange. The stock has dropped 15.7 percent this year.



Maruti’s sales in August climbed 24 percent to a record 104,791 vehicles. The automaker has posted 20 straight months of sales increases as economic growth and rising disposable incomes spur spending.



Demand for cars in India has risen more than 30 percent this year. Sales may double to 3 million vehicles annually by 2015, according to the Society of Indian Automobile Manufacturers.