Even when the talks are still on over the possible hike in excise duty on diesel vehicles, Indian passenger car market leader has taken its stance. Maruti Suzuki has decided to merge itself with Suzuki Powertrain India,a diesel engine manufacturing company. This shift in the focus is perhaps to meet the growing demand for diesel cars. But what needs to be noticed is that recently the demand for even the diesel cars has started to come down. Car sales across the country hasn’t shown much improvement over the previous years. Then, why has Maruti Suzuki decided to invest in diesel engine technology while the other players are still walking on a tight rope. Well, it could be some sort of foresight the company is having.
“We will take diesel engine capacity to six lakh from the current three lakh by mid-2013. The merger will provide cost-reduction and allow production planning under a single management,” Shinzo Nakanishi, MD and CEO, Maruti Suzuki, said.
Suzuki Powertrain India is a subsidiary of Suzuki Motor Corporation, Japan that supplies diesel engines and transmission systems to Maruti Suzuki. The merger once approved will help Maruti Suzuki in sourcing, localization, production planning and cost reduction. Also, there would be synergy in the area of finance, capital structure and administration. Currently, the company is using just 70 percent of its petrol engine manufacturing capacity due to the slump in demand. But what the company needs to do now is to reduce the dependency on foreign suppliers and look at local sourcing to meet the existing demand of its offerings.