Maruti Suzuki to scale up capital expenditure to record Rs 8,000 crore in current FY

The company – which missed the two million units annual sales mark by a mere 34,000 units last fiscal – is confident of outpacing industry growth this fiscal and is upping investments to meet growing consumer demand for its products.

The capex earmarked for the fiscal is nearly 27% higher than Rs 6,329 crore invested in the last financial year. Maruti Suzuki currently has an order backlog of 412,000 units.

Maruti Suzuki Chairman R C Bhargava said despite several headwinds globally from the war in Ukraine to inflationary pressures across countries, the Indian government and the RBI has managed the economy which has enabled it to perform better than others globally. “We are reasonably confident we will do better than the industry and will comfortably cross the 2 million mark this fisca”, he said. How much further the company will go, Bhargava said, will depend on the availability of semi-conductors which will enable Maruti Suzuki to produce vehicles for meeting customer demand.

Maruti Suzuki has production capacity of 2 million units across the three facilities in Gurugram, Manesar and Gujarat. It additionally sources SUV Grand Vitara from Toyota Kirloskar Motor (TKM).

With passenger vehicle sales expected to grow by 5-7 % this fiscal year, Maruti Suzuki is already in the process of increasing production capacity by 100,000 units at Manesar. Additionally, resources have been earmarked for construction of a new manufacturing facility at Kharkhoda in Haryana, the first phase of which will be commissioned in 2025. The increase in capex this fiscal will also go towards readying new model launches, where spends on tooling require a large amount of capex deployment.

On an average Maruti Suzuki has spent around Rs 3,000-4,500 crore of capex annually in the last one decade.Maruti Suzuki Wednesday also said in addition to the new facility being set up at Kharkhoda, the company plans to add production capacity of one million vehicles going ahead to cater to customer demand in the local market as well as abroad. The company plans to ramp up exports to 750,000 units annually over the next eight years.

A senior auto analyst with a MNC brokerage said that if the PV market in India grows at a nominal rate of 5-7% annually in the next five years, Maruti Suzuki would need to expand its capacity by about 100,000 units every year to ensure its market share does not drop below 40-42% in the long term. “The current run-rate of capex is likely to be maintained to ensure demand-supply balance”, he added.