Auto part firms pump up investments in Gujarat to meet Maruti’s demand
MUMBAI: Gujarat, a preferred manufacturing destination for auto companies, is about to see the next wave of investment coming from auto component makers preparing to meet demand from automakers, particularly market leader Maruti Suzuki India Ltd.
The Hansalpur-based Suzuki Motor Gujarat Pvt. Ltd (SMG) unit in the state supplies vehicles to Maruti under a contract manufacturing agreement at cost price.
Some of the major auto component makers in the NCR, including Krishna Group, Minda Industries Ltd, Lumax Industries Ltd and Subros Ltd, that count Maruti Suzuki as their biggest client, are pumping in a cumulative investment of over ₹1,500 crore over the next two to three years to feed SMG’S demand.
While most of the investment will cater to Suzuki Motor Gujarat, Tata Motors, Honda Motorcycle and Scooter India Pvt Ltd will also be driving investments.
Encouraged by the buoyant demand in the domestic market and a strong order book for exports, SMG, which makes the Baleno hatchback at the facility, has been ramping up production at a rapid pace.
The Japanese carmaker plans to produce around 150,000 cars in Gujarat by the end of this fiscal. The facility will be ramped up to its peak capacity of 250,000 units per annum by next fiscal.
SMG will commence production at its second plant in the early part of 2019, Ajay Seth, chief financial officer at Maruti Suzuki, said in an earnings call with analysts on October 27.
Krishna Group, a Gurgaonbased auto component maker, is setting up seven plants with a total investment of ₹700 crore in and around the SMG facility, said Ashok Kapur, chairman of Krishna Group. “We are creating capacities first for Suzuki and then for the rest.”
“With Maruti controlling 50% of the market and all its expansion taking place in Gujarat, the state will be a major focus area for our expansion,” said Deepak Jain, MD at Lumax Industries.
Lumax has invested ₹120 crore in a unit it will inaugurate on Thursday. On an average, Lumax will be investing ₹100 crore every year for the next five years to meet demand from automakers in the region.
“Gujarat is going to be emerging as a big hub and will be a big opportunity for tier one and tier two auto parts firms,” said Nirmal Kumar Minda, chairman of Minda Industries. The company has two plants and will be setting up seven more for ₹500 crore over the next 18 months.
“The car market is expected to grow for the next four to five years and so far there is no reason for it not to grow,” said Rakesh Batra, partner and national leader, automotive practice, EY.