Commissioning of Gujarat facility critical for Maruti to ease capacity constraints


Maruti Suzuki India, India’s largest passenger carmaker, has its plate full. Its plants are working at full capacity and it is continuously working to enhance production of high wait list models like Baleno and Vitara Brezza. The commissioning of the Gujarat plant, which is expected to go onstream in the last quarter of the current fiscal, is thus critical for the company. The Hansalpur site will start with making the Baleno.With wait period for the Baleno and Vitara Brezza running into 6-8 months and 8-9 months, respectively, Maruti is working actively to ramp up production for these models, which now have an estimated outstanding 52,000 and 53,000 bookings, respectively.A Maruti spokesperson explained: “Our plants are running at full capacity. Between the two facilities, our combined capacity is 1.55 million per annum that can be at best stretched to 1.57 million per annum. We are closely working with our vendors to enhance production of high wait list models Baleno and Brezza. It has also meant production adjustment between models sharing same the line example Baleno and Swift.”This is evident from the fact that sale of its popular car Swift fell to 9,000 units in June 2016, down from 17,000 units in June 2015, and from 12,000 units in May 2016. The spokesperson too claimed that it is not a case of lesser demand for some models, but it is a capacity issue or a supply constraint and not a popularity issue.”We are taking all possible efforts to increase production of waitlist models and are hoping that these efforts will bring down waitlist substantially,” he said. For example, plans are afoot to scale up production of the Brezza to 1,20,000 units from an earlier plan of 80,000 units. “Production ramp up is a gradual process, it doesn’t happen in one go. We have ramped up in July and will scale up in following months,” the spokesperson said.

As for the Baleno, sources indicate that a capacity of 12,000 units a month has already been achieved. The company, on its part, said: “We are doing internal production adjustments between models to enhance Baleno output. Can’t give you a number by how much we will be able to ramp up further.”

The Gujarat facility thus assumes greater significance in terms of Maruti’s long term as well as immediate plans. It is expected to start trial production from the January quarter. “The Gujarat facility will give us additional capacity fourth quarter onwards. Baleno will be the first model to be manufactured there, so we are confident it will help up ramp up overall capacity for Baleno,” the spokesperson added.The initial capacity of the first assembly line at Hansalpur will be 1,50,000 units, which will be eventually scaled up to 2,50,000 units yearly. The total capacity at the site would be 7,50,000 cars per annum. Maruti’s Gujarat plant is being set up by a subsidiary of SMC, Suzuki Motor Gujarat, that will supply vehicles exclusively to Maruti Suzuki India.

The company also has a second site near Hansalpur, at Vithlapur, where the company plans to set up production facilities, once it exhausts the capacity at the first site. Total installed capacity in Gujarat will be 1.5 million units per annum, a figure that is equal to its current installed capacity in the country, combining plants at Gurgaon and Manesar.Long wait periods can deter customers to opt for other car models, and hence it is critical for Maruti to do away with capacity constraints. The company, however, noted: “In both the models, Brezza and Baleno, customers are aware and conscious of the waitlist when they are booking. Still bookings are exceeding expectations. Therefore, even if we ramp up production, bookings outpace demand and results are not visible.”

Maruti has plans to sell 2 million units by 2020, by when the local passenger car market is estimated to be about 5 million cars in annual sales. As such, 2.02 million cars were sold in India in 2015-16, a growth of 7.8%, and around 2.78 million passenger vehicles (cars, vans and utility vehicles) were sold last fiscal. Maruti’s sales had grown by 11.5%, selling 1.3 million units between April 2015 and March 2016.The central government’s Auto Mission Plan II forecasts that the passenger vehicle market in India will more than triple to 9.4 million by 2026 from the current 2.78 million units, provided the economy grows at an average 5.8% a year.

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