The country's largest car maker, Maruti Udyog Ltd (MUL), is ready to fire on all cylinders.
Keeping in mind the growth in sales of passenger cars and utility vehicles and reduction in excise duty on small cars, MUL has increased its capital expenditure plans to Rs 9,000 crore till 2010. It will be spending Rs 3,000 crore in capacity expansion of its Manesar plant from 1 lakh to 3 lakh units by 2007-08.
MUL's earnings performance for the fourth quarter and full year was in line with market expectations. The company increased its earnings potential with the decision to buy out the entire 30 per cent stake held by Suzuki Motor Corporation in Maruti Suzuki Automobiles India Ltd (MSAIL). The merger of MSAIL with MUL will create value for all stakeholders, as the move will increase focus on critical issues of business operation.
Since it is mulling the rationalisation of its products, we may see some products being discontinued. But, as for future plans, the company has five new models in the pipeline in addition to variants and upgrades.
MUL is also on schedule to roll out a new volume car exclusively for export in 2008-09. The company has put an export target of 1,00,000 units per annum with the market primarily being Europe. This Nissan-Suzuki compact vehicle will be built at MUL's plant but sold under Nissan's badge.
The diesel variant of Swift is expected to strengthen company's position in the respective space.
With MUL growing at 8.4 per cent per annum (against the industry growth rate of 7 per cent), the company is likely to maintain its share of over 50 per cent in domestic car market.
It has also emerged the most cost-efficient car maker in the country and has been maintaining positive growth in operating profit margins over the last two years despite price cuts and hikes in input prices.
While the increase in input costs and oil prices remain areas of concern, Tata Motors and Fiat's plans for the diesel car market in India may throw up new challenge for MUL.
This article was originally published on October 26, 2006.
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