Maruti and Hyundai to intensify diesel investment in India
Car makers of India have been facing a slowdown in demand of cars for last few months because of the hike in interest rates and fuel prices. In order to maintain their game the car makers are planning on increasing investment in diesel vehicles. As per RC Bhargava, Maruti Suzuki India Chairman, diesel is the solution for fighting the sink in demandand the company will soon be finalizing the strategy for a new diesel plant. Maruti Suzuki India has been leading the sales charts in the country for a long time now. The company had anticipated the market trend long back and had started making diesel engines in 2007 to fulfill the demand. The company is now looking forward to add more capacity and for that purpose it has signed a deal with Italian auto maker Fiat Spa to source 3 lakh diesel engines. Additionally, the company will be planting a second diesel plant at its Gurgaon facility in India.
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World’s fifth largest auto maker Hyundai has a wholly-owned subsidiary in India. The company has planned Rs 400-crore Greenfield plant which will manufacture 1.5 lakh diesel engines annually. This plant is in its final stage and after coming into full operation the diesel engines produced by it would cater to the domestic market. These diesel engines would be powering Hyundai’s popular hatchbacks I10 and EON. At present, the company imports diesel engines from South Korea for its I20 hatchback and other bigger cars. The customers have been preferring diesel vehicles over petrol and now since the government has spared diesel from a higher tax the sales of diesel vehicles is supposed to shoot up in the next few months. The escalated investment in the diesel vehicles is a result of the aforementioned factors. Arvind Saxena, Marketing and Sales director of Hyundai India has referred to diesel as the biggest factor stimulating the purchase of new cars in the current scenario.
The new plant being set up by Maruti Suzuki India would initially have an annual production capacity of 1 lakh diesel engines and will implicate an investment of Rs. 1,000 crore. The company’s facility at Manesar will now be producing 3 lakh diesel engines annually in order to cater to the demand that has been increasing exponentially. Even when the production at the Manesar plant has been increased to 18,000 cars per month the demand still outpaces the supply. The much favored Maruti Swift hatchback has a waiting of five months. Over the years the gap between diesel and petrol has increased and at present diesel is around 40% cheaper to petrol in India. This differential has resulted in the shift of the choice of Indian customers who now prefer cheaper fuel that offers better fuel mileage. Currently the 50% of the total cars sold in India are diesel cars which mainly consist of the pricier sedans and SUVs. Looking at this scenario the decision of scaling up the investment in diesel vehicles seems pretty intelligent. Last year the period of July-November saw a major dip in the Indian auto sector. However, the lower cost of diesel has increased the demand in last few months and has helped the Indian auto sector step in the positive region.
