Capex boost: Maruti Suzuki to invest ₹1.25 lakh cr by FY31

Maruti Suzuki India Ltd, the country's largest automobile manufacturer, is planning to invest ₹1.25 lakh crore by FY31 to launch 10-11 new models, including six electric vehicles, the company informed shareholders on Monday. Most of the new models that are going to be launched will be SUVs (sports utility vehicles), according to the company. The capex will be also utilised in scaling up the company's production capacity from 2 million units at present to 4 million units in the next 7 years.

New Models

The company plans to increase its model from 17 at present to 28 by FY30-31. The company expects a product mix going forward with petrol cars, electric vehicles, hybrid cars, cars using CNG, cars equipped with 20% or more ethanol and possibly cars operating on compressed biogas.

"This mixture of technologies is necessary in the context of meeting the carbon footprint targets and taking into account the buying power of customers, infrastructure situation, and the raw materials available in the country for generating clean power," says the company.

According to the company, all six electric vehicles will be manufactured in the Gujarat plant. The company plans to launch its first electric vehicle by FY24 -25. Maruti Suzuki expects that 15-20% of cars sold by the company in 2030-31 to be EVs, 25% to be hybrids and the rest to use technologies such as ethanol, CNG (compressed natural gas) and CBG.

"R&D will need additional outlays to enable most of the development work relating to Internal Combustion Engine (ICE) cars being done by MSIL. Capex will be needed to develop 10-11 new models, with different fuel options in this period. Production of EVs and SUVs (sports utility vehicles) will also need larger capex," the company says.

Increased production capacity

The company requires ₹45,000 crore to build up an additional production capacity of two million units, according to Maruti Suzuki.

With an aim to increase the production capacity to four million units, the company expects the Kharkhoda plant to be operational by 2025. "With the challenges of the last 4 years behind us, MSIL is projecting a requirement of 4 million production capacity by 2030-31. This requires adding 2 million additional capacity in the next 7 years. Work has already started at Kharkhoda in Haryana where the first line of 2,50,000 units is expected to go into production in early 2025 and 1 million capacity reached in 2028. A second site for 1 million units is under selection and work will start in 2024," the company says.

The company says that by FY31, the company will have five production sites—Gurgaon, Manesar, Kharkhoda, Gujarat, and another new location, which Maruti Suzuki has not revealed yet.

Of the four million units, the company plans to sell more than three million units in the domestic market including sales to other OEM (original equipment manufacturers), whereas 7,50,000-8,00,000 units are expected to be exported. According to the company, the domestic market is expected to grow at ~6% CAGR and is expected to be around 6 million units by FY31.

"Funds would be needed for creating the sales, service and spare parts infrastructure to almost double domestic sale volumes. The infrastructure for exporting the much larger volume of cars will also have to be strengthened. The conversion of production lines to have greater flexibility will need additional capex," says the company.