Maruti gives up Gujarat land to parent Suzuki to set-up car plant

Maruti has given up their Gujarat car manufacturing plant plot in Hansalpur, Becharji, near Mehsana in Gujarat to parent Suzuki Motors Limited. Suzuki will invest about Rs 3,065 crores to set up a new plant for manufacturing cars, which then will be sold to Maruti Suzuki. The news came as a shock to investors. The stock price of MSIL slipped day’s high of 1744.60 by 8% and ended at 1543.40 on the NSE.

The first fully owned Suzuki car plant in India will come into effect as Suzuki Motor Co has announced plans to invest an amount of $488 million in a plant located in Gujarat. This plant will be exclusive for the supply of Maruti Suzuki India Limited (MSIL) leaving Maruti to concentrate on product development and marketing.

Maruti gives up Gujarat land to parent Suzuki to set-up car plant (1)Suzuki Motor Co, owning 56% stake in MSIL will be an exclusive contract manufacturer for Maruti and with cash reserves of around INR 7,500 crores at present, it is sufficient to cover costs for the new plant. The Gujarat plant will have installed capacity and will produce 100,000 cars from 2017.

Suzuki will own 100% of the new venture called Suzuki Motors Gujarat Pvt. Ltd which will undertake manufacture of passenger vehicles and components. As per the terms of a deal between MSIL and Suzuki Motor Corporation, the latter will supply cars exclusively to MSIL, while MSIL will buy cars made by its parent at a cost price which will include royalty fees.

Maruti Suzuki acquired 1190 acres of land in Gujarat’s Mehsana district in 2011 with expansion plans in mind. These will now be transferred to its parent Japanese counterpart with no investments being made by MSIL. The new plant will sell cars only to MSIL under the deal. (via)

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