Maruti Suzuki to Takeover Suzuki Motor's Gujarat Facility
Maruti Suzuki announced on July 31 that it will acquire parent company Suzuki Motor's Gujarat manufacturing facility in order to improve management control over the unit. According to the local car market leader, this will allow it to respond to customer needs in India more quickly.
Suzuki Motor of Japan owns a 100% stake in Suzuki Motor Gujarat (SMG), which supplies Maruti Suzuki with its entire production. According to the company, Maruti Suzuki's board of directors approved the termination of the contract manufacturing agreement with SMG and the acquisition of the entire stake in the production unit on Monday.
Suzuki Motor decided in 2014 to establish a separate manufacturing facility in Gujarat as a wholly owned subsidiary. SMG produced 750,000 units per year.
While the method of purchase has yet to be determined and approved by the board, the contract manufacturing agreement provides for the sale of the unit at book value in the event the arrangement is terminated, according to Maruti Suzuki chairman RC Bhargava. SMG's last known book value was Rs 12,755 crore.
The transaction is expected to be completed by the end of the current fiscal year.
According to Bhargava, the Indian automobile industry has changed significantly since 2014.
With the growth of the Indian car market and export potential, Maruti Suzuki would need to increase its production capacity to about 4 million units per annum by 2030-31, almost double from current levels. The company has commenced work to set up its largest manufacturing facility with a total installed capacity of 1 million units at Kharkhoda, Haryana. Work is ongoing also to identify the location for an additional factory of similar size.