Maruti Suzuki, the automobile major, plans to add an additional capacity of 1 million per year. The company is tightening the bolts to keep up with growth in market demand.
The board members of Maruti approved the creation of an additional capacity of up to one million vehicles per year. They also announced their financial results for March 2023 quarter and overall fiscal year FY23. The one million vehicles per year are approximately 10 lakh units.
Presently, the total existing capacity at Maruti is around 13 lakh vehicles and the vehicles produced are fully utilized.
The existing capacity is in Maruti’s facilities in Manesar and Gurugram. In addition to this, the company is supplied vehicles by Suzuki Motor Gujarat (SMG) under the Contract Manufacturing Agreement.
Maruti is planning to boost growth in market demand including exports through this capacity expansion.
“The company confirmed a capacity addition of 10 lakh vehicles at its facilities in Manesar and Gurugram which will augur well for MSIL as market demand grows in the coming years. We would keep a close eye on the export volumes hereafter, along with a tab on new launches, and see if the demand scenario remains intact after the price hikes from April 1 and the introduction of BS6 Phase 2 compliant vehicles”, said Manish Choudhary, the Head of Research at Stoxbox.
The company also has access to 7.5 lakh units from parent Suzuki Motor’s facility in Gujarat in addition to Manesar and Gurugram. The company gets the supply of vehicles from Suzuki Motor Gujarat Pvt Ltd under a contract manufacturing agreement.
Previous growths of Maruti Suzuki
In Q4FY23, Maruti posted 42.7% YoY growth in net profit to ₹2,623.6 crore, while net sales zoomed by 20.8% YoY to ₹30,821.8 crore. Operating EBIT came in at ₹2,611.1 crore up by a whopping 46.7% YoY.
Total sales volume for the quarter stood at 514,927, recording a single-digit growth of 5.3% against 488,830 units sold in Q4FY22.
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Relatively better sales volume leading to improved capacity utilization, improved realization, cost reduction efforts, favorable foreign exchange variation, and higher non-operating income were the fundamental positive factors of Q4FY23.
Maruti’s total sales jumped by 19% to 1,966,164 vehicles for full-year FY23 compared to 1,652,653 vehicles in FY22.
Among key monitorable going forward in Maruti would be volume ramp-up and consequent market share gains amidst new product launches in the SUV space.
As per ICICI Direct note, Marut is the market leader in the domestic passenger vehicle (PV) space with market share pegged at 41.3% as of FY23. The company has witnessed a loss in market share in the recent past due to weaker offerings in the SUV space which now forms 52% of overall PV sales vs 28% in FY19. The company however in the recent past has focused on increasing market share in this space with an ambitious target of selling 5 lakh SUVs in FY24E with the aim of achieving ~25% market share amid new launches like Fronx, Jimny which have received cumulative bookings of 40,000 units till date.
Also, the brokerage pointed out that the company is also keeping tabs on technological trends through Wagon R (Flex Fuel Prototype, to be launched in 2025) & first concept EV (eVX) powered by a 60 kWh battery with 550 km of range (likely launch in 2025) and is a potential beneficiary of Toyota accelerating the EV push on a global scale (30 EV models, US $35 billion investment).
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