To facilitate its expansion plans, Maruti Suzuki will invest approximately Rs 15,000 crore over the next half-decade. The money will be spent on land banking which in the future will help doubling the number of Maruti Suzuki's dealerships, increase the number and size of stockyards and warehouses as well as improve logistics infrastructure.
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When speaking with Business Standard, Mr. R C Bhargava, Chairman MSIL, stated," We have to double our network as the Gujarat plant output will lead to a gradual doubling of sales. The bulk of the investment required for additional sales will precede the start of production at our Gujarat plant. The total money needed for creating additional sales-and-service infrastructure has been estimated to be Rs 30,000 crore. Of that, half the money will be invested by us, and the rest by dealers."
The reason behind the company requiring such a vast sum of money is due to the steep jump in land value over the last few decades. As a result, bumping up sales and manufacturing infrastructure by buying land in today's date is around 300 per cent that what it would have cost when the company was still setting up.
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Mr. Bhargava also commented on the difficulties being faced by MSIL. "The land cost today is making it difficult for dealers to invest. But if investments are not made, it will hurt us. We will buy sites where we want dealerships and workshops to come up in future," said Bhargava. The company currently boasts of over 1,700 dealerships, nationwide.
As to why the company wanted to own its own showrooms and workshops despite the inflated cost, Bhargava stated, "The dealers might find more profitable opportunities later. We have to think of the future. This challenge never existed in the past. But going forward, dealers will have many options - from opening a McDonald's or Haldiram's outlet to setting up a mall," said Bhargava.
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Maruti Suzuki currently has two manufacturing facilities, both in Haryana. The 300-acre Gurgaon facility was the Indian carmaker's original plant, which has completed over 30 years of service. The second plant was set in action in 2007 in Manesar and is spread over 600-acres. Both facilities have undergone major expansion projects in the past and now boast of a production capability of around 1.45 million units per year. The Gurgaon facility, which started off with a production capability of just 40,000 units, now houses 3 plants which are being used to manufacture Maruti's own K-Series engines as well as its cars.
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MSIL currently has over Rs 13,000 crore in cash reserves and intends to set up a third super-plant in Gujrat with financial help from Suzuki. Once functional, the new facility will substantially increase MSIL's manufacturing output and will help achieve its sales target of 2 million cars by 2020. The plant is expected to be operational by 2017.
