Between domestic sales witnessing a persistent slowdown and prevailing uncertainty over the government’s long term electric mobility roadmap, automakers are hesitant to put their future plans into motion. Some are contemplating scaling back on expansions while some have started down-sizing their workforce.
According to Livemint’s sources, Suzuki Motor Corporation has decided not to double the production capacity of its fully owned factory to 1.5 million units as initially planned. The Indian subsidiary Maruti Suzuki’s falling sales, lack of skilled workforce and inadequate infrastructure in the region are reported to be the reasons behind the automaker’s decision to scale back on its investment plans.
The initial plan was to have two plants in the campus with production capacity of 750,000 units (each) per annum but now the plant-II is not expected to see the light of day. By the end of this fiscal, plant-I’s third assembly line with a capacity of 250,000 units will be ready for production.
Maruti Suzuki India has been registering double digit decline for each month of the current fiscal year. Their sales have declined 20.82 % for the period from April to June 2019, when compared with same period last year.
Less than half of Suzuki’s Tier-I suppliers have made investments on facilities in the vicinity while others continue to support the factory from their existing facilities elsewhere. Such an arrangement would make producing cars in the Gujarat plant more expensive compared to Maruti Suzuki’s Haryana facilities.
Livemint reports that, though the company didn’t respond to its email query, communication to vendors about its decision of not expanding the Gujarat plant has been made. While this puts the suppliers who already made the investment with production capacity of 1.5-million units in mind in a tough spot, vendors who haven’t made such a move would be glad that additional investment is not required, especially when the auto industry is facing uncertainty.
In case Suzuki feels the need for additional capacity in future, one of Toyota Kirloskar Motor’s plants in Bidadi could be utilized. While the Toyota Glanza is being made at Suzuki’s Gujarat plant, the upcoming Toyota badged Vitara Brezza and Suzuki badged Corolla sedan would be made in Bidadi. Cross utilization of plants would help both the Japanese automakers keep their respective facilities productive (read profitable) enough.
It is to be noted that Suzuki has entered into a partnership with Toshiba and Toyota’s subsidiary Denso to set up a lithium-ion battery plant in Gujarat.