Suzuki receives approval to bypass Indian Unit to set up factory image

Suzuki Motor Corp received the go-ahead from shareholders to bypass its Indian unit and set up the Japanese automaker’s first wholly owned car plant in its biggest market.

A majority of Maruti Suzuki India Ltd.’s minority shareholders voted in favor of its proposal to buy vehicles and components from the planned factory by parent Suzuki, according to an e-mailed statement from the Indian company. The proposed plant in the western state of Gujarat will supply exclusively to Maruti, which is 56 percent owned by the Japanese automaker. The approval will give Suzuki more control of its operations in India and invest directly to increase production capacity, while also paving the way of the company’s expansion in the country. The agreement will also allow Maruti to expand its dealer network and build a new premium brand. “Now that the job of making cars is somebody else’s, I can put my energy into developing new models because in India sales don’t happen if you don’t put in new models with good regularity,” Maruti’s Chairman R.C. Bhargava said in an interview in New Delhi last week. “I have to concentrate on R&D and need to focus on building the infrastructure so that I can sell these new cars.” India will soon play a crucial role in the automotive industry, as IHS Automotive projects will overtake Japan and Germany by 2020 to become the world’s third-biggest market after China and the US.

The total investment in the Gujarat factory will be 185 billion rupees (2.8 billion dollars), Bhargava said. The first line at the plant will become active in early 2017 and will have the capacity to make 250,000 vehicles annually. Suzuki’s car production in India will reach 2 million units by 2022 from the 1.4 million at present, he said. Suzuki will invest about 57 billion yen ($468 million) to increase the capital of its wholly owned subsidiary Suzuki Motor Gujarat, according to a statement. The funds will be used for the factory in Gujarat.

Via Bloomberg