Maruti shelves diesel engine capacity expansion plan

While Maruti Suzuki India Limited had cited extensive plans to enhance diesel engine capacities, these plans will not be brought into effect. With the demand for diesel engines not as per company expectations, setting up of this diesel plant with heavy investment as planned, could not have been a viable prospect.

Maruti shelves diesel engine capacity expansion planMSIL, the country’s largest automaker, had announced INR 1,000 crore investment in a diesel plant in existing manufacturing unit in Gurgaon, This new engine plant was to have a total capacity of 1.5 lakh units per annum which would have added to the 3 lakh units produced in Manesar to take total output to 4.5 lakh units.

With demand for diesel engined cars not increasing as per predictions, the company has put these plans on hold. MSIL will continue to source its 1.3 liter MultiJet engine from Fiat following an extension of the contract till 2018. Price of diesel has been steadily increasing ever since January 2013, thus reducing price gap between petrol and diesel resulting in diminished demand for diesel engined vehicles. It is also predicted that diesel prices are expected to be completely de-regulated by December 2014 which will bring demand down further.

The period April to June 2014 saw MSIL sell a total of 85,543 units of diesel engined vehicles contributing to 28.5% of total car share. In the last financial year ending March 31, 2014, the company had sold nearly 3.40 lakh diesel cars. With share of diesel cars falling from 53% to 48% in the country and further slide predicted for the months ahead, is the primary reason why MSIL decided to scrap diesel engine plant plans in Gurgaon.

via Economic Times