With its consolidated net profit more than doubling in 2022-23 (FY23) to Rs 8,211 crore, Maruti Suzuki India (MSIL) announced on Wednesday that it will set up a new plant in the country to expand its annual capacity by 1 million units.
Its chairman R C Bhargava told reporters that the company’s board has yet to decide on the location and necessary investment for the new plant. Currently, MSIL’s production capacity is at 2.25 million units. Another plant in Kharkhoda, Haryana, is under construction and will have the ability to produce 1 million units annually. With the board approving the new plant on Wednesday, the company plans to have a total annual manufacturing capacity of 4.25 million units.
In FY23, MSIL’s volume sales increased by 19 per cent to 1.97 million units. Bhargava said that the company will not borrow any money to establish the aforementioned new plant but use its internal resources. The company has cash reserves of more than Rs 45,000 crore as of April 1, 2023.
“The work on the new plant will start and be carried out simultaneously with the Kharkhoda plant. The Kharkhoda plant’s construction will be completed ahead of the new plant, wherever it comes up,” Bhargava noted.
On investments needed for the new plant, he said, “If the Kharkhoda plant is going to cost X, the new plant will cost slightly more than X because it will come a bit later. It can’t be very much different.” MSIL had stated in May 2022 that it will invest approximately Rs 18,000 crore to establish the Kharkhoda plant.
Bhargava said that MSIL’s total revenues have crossed the landmark of more than Rs 1 lakh crore. “I can’t readily think of many other Indian companies who have done it,” he added.
He said the company could not meet the target of selling more than 2 million cars in the last fiscal year largely due to the semiconductor chip shortage. “In 2023-24 (FY24), the shortage will remain. The kind of improvement we were hoping for has not happened. Q1 of FY24 has been worse as compared to the previous quarter (Q4 of FY23) when it comes to the chip supply. Hopefully, the situation will be better in the next three quarters of FY24,” he added.
He said the company’s loss of production due to chip shortage was about 170,000 units in FY23. “It should be less than 170,000 in FY24 as we are expecting a better supply situation this fiscal year,” he mentioned.
The Chairman said that the company has planned a capital expenditure of about Rs 8,000 crore in FY24. In FY23, its capex stood at Rs 6,329 crore.
He said the company will launch a hybrid vehicle this year, and this model will be sourced from Toyota. Since this will be a top-of-the-line vehicle, MSIL does not expect its volumes to be large. In 2018, the two Japanese companies, Toyota Motor Corp, and Suzuki Motor Corp, signed a global agreement that involved sharing and cross badging of models and technologies.
MSIL’s domestic market share, in terms of volumes, stood at 41.3 per cent in FY23. Bhargava said the company intends to get as close to the 50 per cent target as it can, but it is difficult to predict when it will happen.
He stated that the RBI had increased interest rates by up to 2.5 per cent in FY23, and the current sentiment is that we have reached a peak. “We expect that this cycle will reverse in FY24, and interest rates will come down,” he added. He believes that the interest rate environment will remain “benign” during this fiscal year.
In FY23, the company observed an 8.8 per cent increase in exports, reaching 258,333 units. Bhargava is optimistic that the company’s exports could reach 750,000 units by 2030.
He said the sales in FY23 were much better despite multiple headwinds such as the Ukraine-Russia war, rising inflation and semiconductor chip shortage issue.
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