Capacity constraints could be a reason for Maruti Suzuki’s fall in market share, hinted RC Bhargava, Chairman, at a recent press meet in Delhi. Simply put, the company’s pace of increase in production is not at par with industry growth.
The chairman expressed this opinion, pointing out that Maruti is considering increasing its capacity by one million units. The board members have given their approval to the plan to install the extra capacity.
Early last year, it signed a INR 13,000 crore deal with the Haryana government to acquire 900 acres for its new plant at IMT Kharkhoda which will house production of Suzuki cars and two-wheelers.
Nearly 800 acres will go to Maruti and the balance to Suzuki Motorcycles.The first phase, with an investment of INR 1,100 crore, will see a capacity of 2.5 lakh vehicles annually by 2025. The site will have space for more expansion in the future.
From Maruti’s point of view, this new plant expansion will help meet growing demand and boost exports. Bhargava said overseas shipments could go up to 750,000 cars by 2030.
While production constraints could have hampered growth, Maruti’s lack of SUV offerings had also been a key factor in losing market share. Till FY22, it only had the Brezza but has increased the portfolio with the Grand Vitara, Fronx and the yet-to-be-launched Jimny while updating the Brezza and the XL6.
The new launches have done the trick and FY23 saw Maruti post sales of 1.96 million vehicles with the domestic market taking up 1.7 million units and exports recording an all-time high of 259,333 units. This happened despite the chip crisis which hit output to the tune of 17,000 units.
In an earlier interaction with Mobility Outlook, Shashank Srivastava, Senior Executive Officer- Marketing and Sales, said the launch of the Grand Vitara had acted as a catalyst in Maruti’s growth plans in SUVs. This is borne out by the fact that its share has grown from 10.5% in FY 22 to nearly 18% today.
For this fiscal, the company is betting big on the Fronx and Jimny that will be launched in the coming months. It also plans to launch a seven seater hybrid MPV version of Toyota’s Innova Hycross soon.
According to Bhargava, with the economy growing, demand for smaller cars will fall with consumers seeking more. Price increases have also hit the entry-level category following a host of regulations starting with the transition from BS IV to BS VI, mandatory use of airbags and ABS as well as the rise in input costs. Srivastava said demand for small cars would remain stagnant this fiscal.
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