Suzuki Raises India Investment, Sell Cars to Nissan
By Anand Krishnamoorthy and Kae Inoue
Sept. 7 (Bloomberg) -- Maruti Udyog Ltd., India's largest carmaker, and Japanese parent Suzuki Motor Corp. have raised their investment plans to expand capacity and make the South Asian nation an export hub. Suzuki will also supply a new car model to Nissan Motor Co.
Suzuki and Maruti will spend 90 billion rupees ($2 billion) in India by 2010, 30 billion rupees more than earlier announced, Suzuki Motor's Chairman Osamu Suzuki said in New Delhi today. The spending will go into expanding diesel-engine capacity and a car factory in north India's Manesar.
Suzuki, which owns 54 percent of Maruti, is boosting investments to maintain its lead in India as General Motors Corp., Honda Motor Co. and other automakers expand in the country. India is seeking to attract investments to develop the nation as an automotive production hub.
``India has many advantages that will help it become an auto export hub,'' said Jagdish Khattar, managing director of Maruti, which sells one in two cars in India. ``Infrastructure is a challenge, but there are cost and other advantages here.''
Exports of cars, vans and SUVs from India gained 5.6 percent to a record 175,772 units in the year ended March 31. Since April, auto exports have grown 18 percent.
India's automobile industry needs $40 billion of investments in 10 years to meet a target of growing more than four times and creating 25 million jobs.
Mission Plan
The industry aims to reach a size of $145 billion by 2016 from $34 billion now, the Society of Indian Automobile Manufacturers said today in the Automotive Mission Plan 2006- 2016 drawn up by the industry group.
India's economic expansion, second only to China's among the world's major economies, has been driving demand for cars as incomes rise. That's prompting automakers to boost investments.
``The Indian market has potential,'' said Makoto Kikuchi, who manages $800 million as chief executive officer at Myojo Asset Management Japan Co. in Tokyo. ``Even with Suzuki's expertise in the Indian market, Nissan has to commit itself to compete in the country.''
Suzuki will triple capacity to make 300,000 diesel engines in India annually by 2010. Suzuki and Maruti will together invest 25 billion rupees to raise the capacity.
Capacity at the factory coming up in Manesar will be increased to as much as 400,000 units annually by 2010, Suzuki said. That includes the supply of 50,000 small cars to Nissan.
Maruti and Suzuki will export 100,000 units of the same model and also sell it locally, the official said, without giving details of the car.
Agreement
Suzuki agreed earlier this year to build a new small car model in India for Nissan starting at the end of 2008. That's part of an accord between them to supply each other with models for India, Japan, U.S. and Europe, going beyond their traditional segments while cutting development costs.
Suzuki plans to build 200,000 small cars a year, half of which will be exported to Europe and sold under the Nissan and Suzuki brands.
The two companies said in June they will work together in emerging markets, including India. In India, Maruti sells Suzuki's Swift hatchbacks and Alto minicars.
Suzuki and Nissan are also in talks to build another factory in India, the funding for which hasn't been decided yet, he said. Suzuki said he was unaware of the Indian government's announcement of the investment figure for the project.
Nissan and Suzuki will invest $1.5 billion to set up a factory in India, a government official said earlier today.
Exports
``The factory will be ready in 2008 and most of the products from there will be exported,'' Surojit Mitra, joint secretary in the ministry of heavy industries, told reporters in New Delhi today.
India is Suzuki's largest overseas market. It plans to expand its production capacity in the country by 52 percent to build 960,000 vehicles in the year ending March 2010. Its new factory in India is scheduled to open later this year and Suzuki plans to add new lines over the next four years.
``Nissan's vice chairman is in India meeting government officials to discuss its business and environment,'' said Sadayuki Hamaguchi, a Nissan spokesman in Tokyo. He was unable to confirm the statement from the Indian government.
Suzuki shares fell 0.3 percent to 2,945 yen in Tokyo, while Nissan shares dropped 1.8 percent to 1,317 yen. Maruti's shares rose 19.65 rupees, or 2.2 percent, to 913.05 on the Bombay Stock Exchange at the 3:30 p.m. close.
Maruti expects to sell 630,000 vehicles in the fiscal year to March 31, 2007, compared with 560,000 last year, the Suzuki chairman said.
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