Maruti Suzuki is planning to cut vehicle output by half at its plant at Gurgaon in northern Haryana state and build a new factory in the western state of Gujarat to manufacture up to 2m cars a year.
The company also plans to build a new diesel engine factory at Gurgaon to meet rising local demand.
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Maruti Suzuki is India’s largest carmaker by sales and chairman RC Bhargava said the company plans to trim output at its Gurgaon to 500,000 cars per year by 2015 due to logistical and environmental issues.
The company has previously said its decision on the Gujarat factory is not linked to recent labour problems in Haryana but due to capacity requirements.
Bhargava said: “At no point we said we will shut vehicle production at that [Gurgaon] factory.”
Maruti said, in a statement emailed to just-auto on Monday afternoon (26 March), it would continue to increase production at Manesar, where a third plant with an annual capacity of 250,000 units is being built.
“Once the capacity in Manesar is fully utilised, the company plans to set up a new facility in Gujarat,” the automaker said.
Bhargave had earlier noted the Gurgaon factory’s location, in the middle of a city, presents many logistical issues.
He said Maruti will nonetheless spend US$331m to build the diesel engine factory there. This will start operations by the middle of next year with an initial annual capacity of 150,000 engines which will be doubled in 2014.
Maruti expects car sales to increase by 10% in the fiscal year beginning in April led by demand for diesel models.
Diesel car sales are expected to rise by 150,000 in 2012/13 while sales of petrol cars fall by 50,000, said the company.
Bhargava said: “The demand pattern has shifted drastically to diesel from petrol cars. All indications are that petrol cars will show de-growth with news that another (petrol price) hike is around the corner.”
Diesel sales have been helped by government subsidies which make them much cheaper than petrol models even as overall demand growth has slowed due to rising interest rates and petrol prices.
Diesel car sales have doubled to around 40% of new purchases in India in the past few years. Maruti Suzuki’s new Swift diesel hatchback has a waiting list of more than six months.
Maruti currently manufactures 300,000 diesel engines and its focus on diesel cars has rendered 40% of its petrol engine capacity at Gurgaon under-used.
