Deteriorating Indian economy forces Maruti Suzuki to think again on their Gujarat plans

India’s largest car manufacturer, Maruti Suzuki India is planning on postponing their plans of setting up a manufacturing unit in Gujarat due to deteriorating Indian economy. Apart from the declining economy, rising fuel prices coupled with higher interest rates are pushing car buyers in India away. This year itself, car sales in the Indian auto industry has slowed down by 4%.

Mr R C Bhargava, Chairman, Maruti Suzuki India, said, “We may relook at our long time investment because of the slowdown. We are relooking at the timing of our investment. We may have to delay some of the investment by six months to a year.”

This year has been one of the worst for MSI. Apart from manufacturing 50,000 less car, labor problems forced Maruti Suzuki India to suffer losses in revenue to the tune of Rs 2,500 crores. The timing of strike too was very bad as Maruti Suzuki had just launched their most awaited car in India, new Swift hatchback. Maruti is sitting with more than 100,000 pending delivery orders of the new Swift.

As of now MSI has resolved issues with their laborers and production is back to capacity. Maruti plans on clearing pending deliveries by April next year. “We are worse off than the industry because we had the strike. We are trying to reach last year’s volumes; but we will end up worst than the industry by minus 5-8%,” Mr Bhargava added.

Earlier in October, Maruti announced that they were going to set up a new unit in Gujarat. Maruti was supposed to invest around Rs 3,000 to Rs 4,000 crores in setting up their first plant in Gujarat, 3rd in India. But now it seems that the car manufacturer is going to postpone their plans by 6 months to 1 year.